HBK Talks Settlement
Hedge fund giant HBK Investments is looking at paying the biggest penalty yet in a two-year-old investigation of abusive trading in the so-called PIPEs market.
The $7 billion Dallas-based hedge fund is in active settlement talks with the Securities and Exchange Commission to resolve allegations of improper short sales. The fund allegedly made improper trades in two companies that were selling discounted stock in private investments in public equity, or PIPEs, deals.
People familiar with the hedge fund say no settlement is imminent. HBK officials, however, have made it clear to investors who have inquired about the investigation that they want to put the matter behind them.
But regulators are driving a hard bargain, demanding a penalty greater than $16 million and the suspension of at least one employee at the multistrategy hedge fund, sources say.An SEC spokesman declined to comment on the HBK settlement talks. Jon Mosle, HBK's general counsel, declined to comment. In a typical PIPE deal, a small, cash-strapped company raises cash by selling discounted stock, or a bond that converts into discounted shares. Shares of the seller usually decline as investors anticipate a flood of discounted stock coming into the market. Regulators are looking into allegations of improper short-selling by at least a dozen different hedge funds in advance of PIPE deals. The improper shorting, regulators contend, allowed the hedge funds to score a quick profit from the inevitable decline in the stock of the issuing company.
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