Securities Law Prof Blog

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

Tuesday, April 3, 2012

UK Hedge Fund Adviser Owes SEC $98 Million for Late Trading

On March 28, 2012, the federal district court for the Southern District of New York entered a final judgment in favor of the SEC ordering total monetary relief of $98.6 million and enjoining Pentagon Capital Management (“PCM”), a United Kingdom based hedge fund adviser, and its chief executive officer, Lewis Chester, from violating the antifraud provisions of the securities laws.

Previously, on February 15, 2012, the Court issued an Opinion finding that Defendants “intentionally, and egregiously,” violated the antifraud provisions of the securities laws by engaging in a late trading scheme to defraud United States mutual funds. The Court also issued an Opinion explaining its decision to impose a penalty equal to the disgorgement ordered because, inter alia, “Defendants understood that late trading was illegal and acted with marked scienter, going to great lengths to seek out, structure, and maintain the ability to deceive the funds into accepting their late trades and attempting to cover up their late trading after the fact.”

PCM is an investment adviser and investment manager based in London, England, and is registered with the United Kingdom Financial Services Authority.

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