Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, September 5, 2007

SEC Bars Hedge Fund Manager for Market-Timing

On  September  4,  the  SEC issued   an   Order   Instituting Administrative  Proceedings  Pursuant  to  Section   203(f)   of   the Investment  Advisers  Act  of  1940,  Making  Findings,  and  Imposing Remedial  Sanctions  (Order)  against  Brent  William  Federighi,  who previously ran two San Francisco-based hedge funds known as Ilytat and Gage Capital.  The Order finds that on Aug. 22, 2007, a final judgment was entered by consent against  Federighi,  permanently  enjoining  him  from  future violations of Rule 10b-5.  The Commission's complaint alleged that from 2000 to 2003,  Federighi, who co-managed the Ilytat hedge fund and later managed the Gage  hedge fund after Ilytat closed, deliberately exploited  a  loophole  in  the mutual fund order entry system used by  the  hedge  funds'  broker  in order to place mutual fund trades after the 4:00 p.m.  (Eastern  time) market close while still  receiving  the  current  day's  mutual  fund price. Some trades were placed as late as 5:45 p.m. (Eastern time).  Based on the above, the Order bars Federighi from association with any investment  adviser  with  the  right  to  reapply  after  18  months.  Federighi consented to the issuance of the Order without admitting  or denying any of the findings, except he admitted to the  entry  of  the
injunction. (Rel. IA-2641; File No. 3-12743).

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