Firm Hit for Allowing Long and Short Positions in Same Securities
A hedge fund manager agreed to pay over $2.5 Million in disgorgement and penalties for violating Rule 105 of Regulation M by selling securities short within 5 days of purchasing in a public offering. The SEC charged that one of the violations occurred even though the matching transactions were made by separate portfolio managers running separate strategies. The SEC explains that both portfolio managers had access to each other’s trading information, investment decisions were discussed by a centralized Investment Committee, and a single Chief Investment Officer had final decision-making authority.
OUR TAKE: We think firms should ban both short and long positions in the same security. However, a firm that wants to allow freedom to portfolio managers to short must implement impenetrable information barriers.
http://www.sec.gov/litigation/admin/2010/34-62982.pdf
OUR TAKE: We think firms should ban both short and long positions in the same security. However, a firm that wants to allow freedom to portfolio managers to short must implement impenetrable information barriers.
http://www.sec.gov/litigation/admin/2010/34-62982.pdf
Posted by Todd Cipperman at 9/24/2010 6:12 AM 
Categories: Compliance and Operations
Tags: regulation m rule 105 short sales
Categories: Compliance and Operations
Tags: regulation m rule 105 short sales
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