GLG hedge fund to pay $3.2 million in SEC settlement

28 Jun, 2007

Hedge fund GLG Partners agreed to pay more than $3.2 million in fines after the US Securities and Exchange Commission found it had earned $2.2 million in illegal profits, the agency said on Tuesday.
The settlement comes less than two days after GLG Partners, one of Europe's biggest hedge funds with $12 billion in assets, said it plans to go public in the United States.
Regulators said the firm engaged in manipulative short-selling that helped earn it $2.2 million in illegal profit between July 2003 and July 2005. The agency said GLG violated a key SEC rule 16 times in connection with 14 different public offerings.
The fund will pay a $500,000 civil penalty plus about $2.2 million in disgorgement and prejudgement interest of $489,455, after it covered short positions with shares it bought in public offerings. The SEC prohibits investors from covering a short sale with securities obtained in a public offering when the short sale occurs within five business days before the pricing of the offering. The London-based hedge fund has promised to adopt a written policy, to train new employees and to appoint a senior person to make sure the firm does not run afoul of the SEC's rule 105 Regulation M again.
"With this action against GLG, the SEC reaffirms its commitment to protecting investors by upholding the integrity of the public offering process," Linda Chatman Thomsen, head of the SEC's Division of Enforcement, said in a statement.
Regulators are monitoring the loosely regulated hedge fund industry closely to make sure portfolios do not violate US securities laws at a time when investors are pouring in new money and assets have doubled to $1.5 trillion in three years.
GLG did not admit or deny wrongdoing as part of the settlement, which involved public offerings in the funds GLG Market Neutral Fund, GLG North American Opportunity Fund, GLG Technology Fund and GLG European Long Short Fund.

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