Thursday, 24 July 2014
Last updated 5 hours ago
Jan 4 2008 | 8:18am ET
The Securities and Exchange Commission suffered another setback to its effort to restrict hedging with private investment in public equities, as a federal judge dismissed the regulator’s charges against a hedge fund.
The SEC had claimed that Dallas-based Gryphon Partners had violated Section 5 of the Securities Act of 1933 when it covered short positions using PIPE shares. It is the second such ruling on the federal level; in October, a federal judge in Charlotte, N.C., dismissed the SEC’s charges against John Mangan, formerly of hedge fund Mangan & McColl Partners.
In dismissing the charges against Gryphon chief Edwin Lyon and the Gryphon Family of Funds, U.S. District Judge Sidney Stein in New York called the SEC’s theory that covering short sales with PIPE shares is an unregistered distribution of securities “implausible,” and the “negligible support” it provided.
“We are very gratified that Judge Stein has rejected what was the centerpiece of the SEC’s case against Gryphon and myself,” Lyon, who, like Mangan, still faces other charges, said. “We look forward to prevailing on the few remaining issues in the case and believe that we will be entirely vindicated in this matter.”
“Judge Stein’s well-reasoned and careful opinion obviously undermines the SEC’s entire theory of a Section 5 violation both in this case, and the many, many other enforcement actions that the SEC has brought and is considering bringing against other hedge funds,” Gryphon’s lawyer, Christopher Clark, said. “This is an important decision for Gryphon, for Bucky Lyon and for the hedge fund community as a whole.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…