Post by sandi66 on Oct 15, 2007 17:19:34 GMT -5
UPDATE: SEC Sues NY Hedge Fund Co For Improper Short Sales
(Updates with comment from lawyer for Colonial in last paragraph.)
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The Securities and Exchange Commission sued Colonial Investment Management LLC on Monday, alleging the New York hedge fund company improperly used shares purchased in registered offerings to cover short sales that occurred in a restricted period before those offerings were priced.
The lawsuit, filed in federal court in Manhattan, alleged Colonial Investment and its Colonial Fund LLC fund realized illicit profits in excess of $1.48 million as a result of the improper trading.
The SEC claims that Colonial violated a rule that prohibits covering of a short sale with securities purchased in a registered offering if the short sale occurred during a restricted period.
Colonial allegedly used shares purchased in at least 18 registered offerings to cover short sales that occurred in the five business days before the pricing of those offerings, the SEC said.
"Short sellers who violate the rule's prohibitions can profit unfairly because they largely avoid exposure to market risk by using shares purchased at a discount in a registered offering to cover restricted period short sales," the SEC said.
Cary G. Brody, a principal of Colonial Management, allegedly directed, authorized and supervised trading of the securities at issue, the SEC said. Brody, who also is a defendant in the case, is alleged to have directly benefited from the transactions because he was an investor in the company and his compensation was based in part on its profits, the SEC said.
"We intend to defend the allegations both factually and legally," said Ira Lee Sorkin, a lawyer for Colonial.
www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20071015%5cACQDJON200710151624DOWJONESDJONLINE000594.htm&
(Updates with comment from lawyer for Colonial in last paragraph.)
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The Securities and Exchange Commission sued Colonial Investment Management LLC on Monday, alleging the New York hedge fund company improperly used shares purchased in registered offerings to cover short sales that occurred in a restricted period before those offerings were priced.
The lawsuit, filed in federal court in Manhattan, alleged Colonial Investment and its Colonial Fund LLC fund realized illicit profits in excess of $1.48 million as a result of the improper trading.
The SEC claims that Colonial violated a rule that prohibits covering of a short sale with securities purchased in a registered offering if the short sale occurred during a restricted period.
Colonial allegedly used shares purchased in at least 18 registered offerings to cover short sales that occurred in the five business days before the pricing of those offerings, the SEC said.
"Short sellers who violate the rule's prohibitions can profit unfairly because they largely avoid exposure to market risk by using shares purchased at a discount in a registered offering to cover restricted period short sales," the SEC said.
Cary G. Brody, a principal of Colonial Management, allegedly directed, authorized and supervised trading of the securities at issue, the SEC said. Brody, who also is a defendant in the case, is alleged to have directly benefited from the transactions because he was an investor in the company and his compensation was based in part on its profits, the SEC said.
"We intend to defend the allegations both factually and legally," said Ira Lee Sorkin, a lawyer for Colonial.
www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20071015%5cACQDJON200710151624DOWJONESDJONLINE000594.htm&