The SEC charged a New York-based fund manager with conducting a
pair of illegal trading schemes to financially benefit his investment fund
Octagon Capital Partners LP.
The SEC alleges that the fund manager made $831,071 during a
four-year period through illicit trading while he also worked as a portfolio
manager and employee at a New Jersey-based firm that served as an adviser for
several affiliated investment funds. In one scheme, he illegally matched
31 pre-market trades to benefit his own fund at the expense of one of his
employer’s funds. In the other scheme, the fund manager conducted insider
trading in the securities of 19 issuers based on nonpublic information he
learned in advance of their offering announcements. Furthermore, the fund
manager signed two securities purchase agreements in which he falsely
represented that he had not traded the issuer's securities prior to the public
announcement of the offerings in which he had been confidentially solicited to
invest.
The fund manager agreed to pay
more than $1.3 million to settle the SEC’s charges.
“By engaging in more than 50 instances of illegal activity in his securities trading, [the fund manager] showed a complete disregard for the securities laws and our markets,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “[He] also misused his position of authority as a portfolio manager of his employer’s fund in order to make handsome profits for his own fund.”
According to the SEC’s
complaint filed in U.S. District Court for the Southern District of New York, the
fund manager conducted his schemes from 2007 to 2011. He caused Octagon
to purchase stock in small, thinly traded issuers at the going market price so
that he could sell the same stock the following day to his employer’s fund at a
price substantially above the prevailing market price. Each of the sales
from Octagon to the employer’s fund occurred in pre-market trading, thus the
fund manager was able to ensure that the trades matched. Later that same
day or within a few days of the matched trades, he directed the employer’s fund
to sell the recently-acquired stock on the open market at a loss. The fund
manager generated ill-gotten gains of $586,338 for Octagon in this scheme.
For more information, visit SEC Charges New York-Based Fund Manager with Conducting Fraudulent Trading Schemes
