The Securities and Exchange Commission has charged a New York hedge fund with illegal naked short sales.

Colonial Investment Management and its principal, Cary Brody, allegedly used shares purchased in at least 18 registered public offerings to cover short positions, including one involving Legg Mason shares. The alleged malfeasance took place between 2001 and 2004, when it was illegal to cover shorts during the five days prior to offer pricing with securities bought in the offering.

The SEC, which filed its complaint in Manhattan federal court, alleges that the hedge fund, Colonial Fund, made $1.48 million in ill-gotten profits from the illicit naked shorts.