D.E. Shaw and Deerfield Management are among a group of hedge funds that have agreed to pay a total of $14.4 million to settle market manipulation charges by the Securities and Exchange Commission.
The regulator accused 23 firms of obtaining “illicit profits†by improperly buying and selling shares, in what is the commission’s biggest crackdown since it strengthened a ban on certain short selling in 2007.
Twenty two of the firms have agreed to settle the claims, though they did not admit or deny wrongdoing. G-2 Trading is fighting the claims, the S.E.C. said. The charges relate to Rule 105, which prohibits investment funds from short selling a company’s stock within the five days prior to a company’s public offering and then buying new shares in the public offering.
Short sellers sell stock they have borrowed, betting that they will be able to buy those shares back at a later date for a lower price. The S.E.C. contends that short selling ahead of a company public offering artificially depresses the value of the shares.
The S.E.C. accused the firms of buying shares from a broker, dealer or underwriter in a public offering days after short selling the same securities.
It also issued a warning to “highlight risks to firms†that have not complied with Rule 105. The S.E.C. has said the rule applies to firms regardless of the intent of a trader.
D.E. Shaw agreed to pay $667,000 to cover its gains on the trades, prejudgment interest and penalties. The fund had $22.9 billion in assets under management as of July 2013. A spokesman at D.E. Shaw declined to comment.
Deerfield Management, the health care hedge fund founded by the former Tiger Management director Arnold H. Snider, agreed to pay more than $1.8 million to settle the claims.
Other funds that agreed to settle the charges included Ontario Teachers’ Pension Plan Board, Hudson Bay Capital Management, Blackthorn Investment Group, Claritas Investments, Credentia Group, JGP Global Gestão de Recursos, M.S. Junior Swiss Capital Holdings and Michael A. Stango, Manikay Partners, Meru Capital Group, Merus Capital Partners, Pan Capital AB, PEAK6 Capital Management, Philadelphia Financial Management of San Francisco, Polo Capital International Gestão de Recursos, Soundpost Partners, Southpoint Capital Advisors, Talkot Capital, Vollero Beach Capital Partners, War Chest Capital Partners, and Western Standard.
