U.K. hedge fund GLG Partners, which recently launched plans to complete a reverse merger that would see it list in the U.S., received a rude American greeting from the
Securities and Exchange Commission
The SEC fined GLG $3.2 million to settle a complaint related to short-selling 12 publicly listed companies in the U.S. The rule the hedge fund broke is a restriction that doesn't allow short-selling of public shares and then covering the short position with a secondary or follow-on offering.
Such short trading usually has the effect of depressing the share value.
"We want to ensure that the prices are set by the natural forces of supply and demand," said Antonia Chion, associate director of the SEC's enforcement division.
GLG Partners made more than $2.2 million in illegal profits in four of its managed hedge funds by shorting 14 offerings of companies, including
Taiwan Semiconductor Manufacturing
Chicago Mercantile Exchange
"Foreign-based hedge funds that trade on the U.S. markets cannot turn a blind eye to compliance with the U.S. federal securities laws," said Chion in a statement.
A GLG spokesman says the hedge fund is glad to have the matter with the SEC behind it and has put in place remedies within its various affiliate funds to make sure it complies with the regulatory body's rules.
"We have cooperated fully with the SEC since the moment the trades in question were brought to our attention," he says.
GLG manages approximately $20 billion in assets through various investment vehicles.
On Monday, GLG announced that it was selling 28% of itself in a reverse merger with
Freedom Acquisition Holding
( FRH), a move that would have the effect of the company listing on the
New York Stock Exchange
sometime this fall.
Under the terms of the $3.4 billion deal, GLG's owners will receive $1 billion cash and 230 million shares of the shell company Freedom, which equates to a 72% stake worth about $2.4 billion.
Freedom, which will be renamed GLG Partners, Inc. and trade under the ticker symbol GLG, was formed and funded solely for the purpose of acquiring other companies.