GLG agrees to pay USD3.2m to settle SEC short-selling charges
London-based hedge fund manager GLG Partners, which has just announced plans to obtain a US stock market listing through a reverse takeover, has agreed to pay more than USD3.2bn to settle charges of carrying out illegal short-selling in connection with 14 public offerings.
According to the US financial regulator, the Securities and Exchange Commission, GLG made more than USD2.2m in illegal profits for four of the hedge funds it managed over a two-year period, by committing multiple violations of Rule 105 of Regulation M of the Securities Exchange Act of 1934.
Rule 105, designed to prevent manipulative short-selling, prohibits covering certain short sales with securities obtained in a public offering. GLG agreed to a cease-and-desist order and payment of more than USD3.2 million in disgorgement, prejudgment interest, and penalties. In accepting the settlement offer, the SEC took into account remedial acts undertaken by the firm, and its co-operation in the investigation.
'With this action against GLG, the SEC reaffirms its commitment to protecting investors by upholding the integrity of the public offering process,' says Linda Chatman Thomsen, director of the commission's enforcement division.
Adds the division's associate director Antonia Chion: 'Foreign-based hedge funds that trade on the US markets cannot turn a blind eye to compliance with the US federal securities laws.'
Without admitting or denying the findings, GLG consented to an SEC order that finds that, between July 2003 and May 2005, the firm violated Rule 105 on 16 occasions during 14 public offerings in trading for the GLG Market Neutral Fund, GLG North American Opportunity Fund, GLG Technology Fund, and GLG European Long Short Fund. At the time, the firm did not have any policies, procedures or training on Rule 105.
GLG's payment includes disgorgement of profits amounting to some USD2.2 and prejudgment interest of USD489,455, as well as a USD500,000 civil penalty. As part of the settlement, GLG has agreed to adopt and implement policies and procedures focused on compliance with Rule 105, provide training on the rule to employees, including compliance and legal personnel, and designate a senior employee as responsible for overseeing its future compliance.
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