Another Hedge Fund Discloses PIPEs Probe
Angelo declined to discuss the eight other companies the SEC has asked for information about. An SEC spokesman declined to comment.
One of the allegations regulators are looking at in the PIPEs probe is that some hedge funds routinely shorted a stock once they learned a PIPEs deal was in the works. Regulators contend that such premature short trades are illegal, because knowledge of such deals is confidential, nonpublic information.
It's not uncommon for stocks of companies doing PIPEs deals to drop in price after it becomes public that the company has sold thousands of shares at a discount.
Hedge funds, however, aren't the only target of the investigation, which is being coordinated with the National Association of Securities Dealers and in some instances, the Department of Justice. Investigators also have targeted brokerage firms that serve as placement agents for PIPEs deals by lining up investors.To date, the broad-based inquiry has led to the criminal conviction of a former SG Cowen managing director on insider trading charges, and a $1.45 million civil settlement with a former First New York Securities hedge fund manager. Emanuel Friedman, former co-CEO of Friedman Billings Ramsey (FBR), also faces potential civil charges, as does the investment firm he co-founded. Other Wall Street firms that face potential regulatory action arising from the probe include Knight Trading (NITE) and Refco (RFXCQ), the scandal-tarred commodity and derivatives brokerage.
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