Securities Law Prof Blog

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

Tuesday, June 26, 2007

GLG Settles Short Selling Charges

The SEC today announced settled enforcement actions against London-based hedge fund adviser GLG Partners, L.P. for illegal short selling in connection with 14 public offerings.  During a two-year period, GLG made more than $2.2 million in illegal profits in four of its managed hedge funds by committing multiple violations of Rule 105 of Regulation M of the Securities Exchange Act of 1934. Rule 105, designed to prevent manipulative short selling, prohibits covering certain short sales with securities obtained in a public offering. GLG agreed to a cease-and-desist order and payment of more than $3.2 million in disgorgement, prejudgment interest, and penalties. In accepting GLG’s settlement offer, the SEC considered remedial acts undertaken by GLG, and GLG’s cooperation in the SEC’s investigation.

Without admitting or denying the findings, GLG consented to the SEC order that finds, from July 2003 through May 2005, GLG violated Rule 105 on 16 occasions in 14 different public offerings in the following funds: GLG Market Neutral Fund; GLG North American Opportunity Fund; GLG Technology Fund; and GLG European Long Short Fund. At the time, GLG did not have any policies, procedures or training on Rule 105.  See SEC Sues London-Based Hedge Fund Adviser GLG Partners, L.P. for Illegal Short Selling in Connection with Public Offerings.

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