SEC Charges Trader

Securities regulators are suing a former hedge fund manager, charging him with insider trading in shares of a small company doing a private placement.

The civil lawsuit filed by the Securities and Exchange Commission against John Mangan Jr. arises from a lengthy investigation into allegations of improper trading by hedge funds that invested in a 2001 private investment in public equity, or PIPE. The lawsuit is the latest in a long string of regulatory actions to stem from the investigation into allegations of improper trading in the deal, which raised $12 million for Compudyne(CDCY Quote), a Maryland security-services company.

Mangan, in a statement, says he intends the fight the SEC charges and did nothing wrong.

A week ago, the SEC and the National Association of Securities Dealers reached a settlement with Friedman Billings Ramsey(FBR Quote), the brokerage firm that managed the PIPE and found hedge funds to invest in the deal. Several of the investment firm's former top executives, including co-founder Emanuel Friedman, were sanctioned by regulators.

Mangan is a former Friedman Billings Ramsey broker who was still registered with the investment firm at the time of the PIPE deal. At the same time, Mangan also was co-managing a hedge fund with Hugh McColl III, the son of former Bank of America(BAC Quote) CEO Hugh McColl. The SEC charges Mangan made the improper trades through an account managed by McColl.

McColl, also named as a defendant in the SEC lawsuit, settled with regulators. He is paying a penalty of $115,643.