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Alternative Market Briefing

SEC charges New York-based fund manager with conducting fraudulent trading schemes

Wednesday, December 12, 2012

Bailey McCann, Opalesque New York: The Securities and Exchange Commission (SEC) atoday charged a New York-based fund manager with conducting a pair of illegal trading schemes to financially benefit his investment fund Octagon Capital Partners LP. According to the complaint, Steven B. Hart made $831,071 during a four-year period through illicit trading while he also worked as a portfolio manager and employee at a New Jersey-based firm that served as an adviser for several affiliated investment funds.

In two separate schemes, Hart engaged in insider trading and placed trades in his fund to benefit his fund over that of his employers. He also misrepresented when some trades were placed in order to hide the fact that he was insider trading. Hart has agreed to settle with the SEC and will pay $1.3m in fines.

Hart was confidentially solicited by 19 issuers to invest in securities offerings where he expressly agreed to go "over-the-wall" and keep confidential the information he received and not trade on it. Nevertheless, Hart traded for Octagon on the basis of material nonpublic information about the offerings in breach of his duty of trust or confidence. Hart’s illegal trades involved PIPE offerings, registered direct offerings, and confidentially marketed public offerings.

"By engaging in more than 50 instances of illegal activity in his securities trading, Hart showed a com......................

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