22 hedge funds settle with the SEC for $14.4 million

Agency charged 23 funds with market manipulation

The Securities and Exchange Commission (SEC) is smiling today. The agency announced that it has closed the books on charges that some hedge funds had manipulated the market.

The SEC said it has reached a settlement with 22 of the 23 firms it accused of violating its Rule 105, which prohibits investment funds from short selling a company’s stock within the five days prior to a company’s public offering and then buying new shares in the public offering. The agency accused the hedge funds of buying shares from a broker, dealer or underwriter in a public offering days after short selling the same securities.

As part of the settlement, the 22 firms will pay the SEC $14.4 million but will not admit or deny any wrongdoing.

One fund, G-2 Trading, refused to enter the agreement, instead choosing to fight the SEC in court.

The SEC is also issuing a warning to “highlight risks to firms” that have not complied with Rule 105, and adds that the rule applies to all hedge funds regardless of the intents of individual traders.

D.E. Shaw and Deerfield Management—two of the country’s top hedge funds—are a part of the settlement. D.E. agreed to pay $667,000, while Deerfield agreed to pay $1.8 million.

The other funds involved in the settlement are Ontario Teachers’ Pension Plan Board, Hudson Bay Capital Management, Blackthorn Investment Group, Claritas Investments, Credentia Group, JGP Global Gestão de Recursos, M.S. Junior Swiss Capital Holdings and Michael A. Stango, Manikay Partners, Meru Capital Group, Merus Capital Partners, Pan Capital AB, PEAK6 Capital Management, Philadelphia Financial Management of San Francisco, Polo Capital International Gestão de Recursos, Soundpost Partners, Southpoint Capital Advisors, Talkot Capital, Vollero Beach Capital Partners, War Chest Capital Partners, and Western Standard.

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