Fri, Feb 27, 2015
A A A
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.

Bg

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. Opalesque Exclusive: Very small CTA averages 6.90% per month since April’14 inception[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: There aren’t many one-man shops around in the hedge fund world but we talked to one. Andrew S. Peskin, who is ba

  2. Investing - Top U.S. hedge funds cut Apple stakes ahead of all-time high, John Paulson holds gold ETF in Q4 but cuts back on some miners, Hedge funds exited tumbling oil company shares late last year, Some top investors exit Herbalife, Soros added shares in fourth quarter, Moore Capital boosts U.S. financial holdings, reduces China bets[more]

    Top U.S. hedge funds cut Apple stakes ahead of all-time high From Reuters.com: Top U.S. hedge fund management firms, including David Einhorn's Greenlight Capital and Philippe Laffont's Coatue Management, reduced their stakes in Apple Inc during the fourth quarter, ahead of the iPhone mak

  3. Opalesque Exclusive: Skënderbeg launches four single-manager funds with Your Wealth AG[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Skënderbeg Funds AGmvK, an investment fund for qualified investors under Liechtenstein law (umbrella fund),

  4. Opalesque Roundtable: Many Swiss investors are questioning the value proposition of hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva: There is a well-known transition among investors in hedge funds between high-net-worth individuals and institutional investors, Ian Hamilton, head of the IDS Group, said during the recent

  5. UCITS HFS Index starts year on positive note with 1.09% gains in January[more]

    Komfie Manalo, Opalesque Asia: The UCITS HFS Index started the year on a positive note gains of 1.09% in January after finishing 2014 with a modest performance of 1.62%. Index provider 2n20 said th