Mon, Oct 5, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Carlson Capital settles with SEC for alleged short selling scheme

Monday, September 27, 2010
Opalesque Industry Update – The Securities and Exchange Commission, the US financial regulator, filed formal charges last Friday againstCarlson Capital, LP, a $5.5bn Dallas-based hedge fund run by Clint Carlson, for alleged improper participation in four public stock offerings after selling short those same stocks.

In its order, the SEC said that Carlson violated Rule 105 on at least four occasions and even introduced internal policies and procedures that lack the necessary mechanism to prevent the firm from participating in relevant offerings.

The SEC alleged that in one occasion, the violation occurred when the portfolio manager who sold short stocks and the portfolio manager who bought the offering shares were different.

Antonia Chion, Associate Director of the SEC’s Division of Enforcement commented, "Investment advisers must recognize that combined trading by different portfolio managers can still constitute a clear violation of Rule 105 when short selling takes place during a restricted period. This is true even when the portfolio managers have different investment approaches and generally make their own trading decisions."

Under SEC Rule 105 of Regulation M, short sellers are prevented from reducing proceeds received by companies and shareholders by artificially depressing the market price shortly before the company prices its public offering. Rule 105 ensures that offering prices are set by natural forces of supply and demand rather than manipulative activity by prohibiting the short sale of an equity security during a restricted period — generally five business days before a public offering — and the purchase of that same security through the offering. The rule applies regardless of the trader's intent in selling short the stock.

On March 25, 2010, the SEC announced it was conducting investigation against Carlson Capital over four alleged secondary stock offerings between late 2007 and mid-2009.

A day later, a spokesman for Carlson admitted that the SEC was investigating the fund and that the firm was cooperating with the regulator.

"Carlson Capital has been cooperating voluntarily and fully with the SEC relating to an inquiry in connection with Rule 105 and will continue to do so," a spokesman for the fund said.

Last week (September 23), Carlson agreed to settle its case with the SEC and pay $2.65m in disgorgement, penalties and pre-judgment interest, without admitting or denying the SEC’s findings.
- P. Dumlao.


What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Performance - Hedge fund moguls Einhorn, Loeb, Rosenstein lose money in September, Risky strategy sinks small hedge fund[more]

    Hedge fund moguls Einhorn, Loeb, Rosenstein lose money in September From Billionaire stock pickers David Einhorn, Daniel Loeb and Barry Rosenstein on Wednesday told their wealthy investors they lost money in September as market turmoil inflicted more pain on some of America'

  2. Opalesque Exclusive: IRAs represent billions of untapped capital for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva: Retirement accounts might not be the first source that comes to mind for those looking to raise funds, but they may represent billions of untapped capital. Unlike traditional retirement accounts,

  3. Opalesque TV: One way to access market hedge funds in the EU under the AIFMD radar[more]

    Benedicte Gravrand, Opalesque Geneva: While the Cayman Islands, the US and Hong Kong await the pan-European marketing passport to be extended to alternative investment fund

  4. Investing - U.S. biotech bloodbath hits hedge funds but some bargains emerge, Computer-driven hedge funds betting on further stock selloff[more]

    U.S. biotech bloodbath hits hedge funds but some bargains emerge From A seven-day selloff of U.S. biotechnology stocks has hit sector investors - especially hedge funds - hard. But some managers say it was overdone and are already eyeing bargains such as Gilead Sciences Inc

  5. Vilas’ equity long bias hedge fund generates market-beating results[more]

    Komfie Manalo, Opalesque Asia: The Vilas Fund, an equity long bias fund managed by Chicago, Illinois-based Vilas Capital Management, posted five-year annualized returns, net of fees, of 23.47% vs. 15.87% for the S&P 500 Index, including divid