SEC Charges Securities Professionals and Traders in International Hedge Fund Portfolio Pumping Scheme
Feb. 24, 2011
The SEC announced the filing of civil enforcement action against a California-based broker-dealer and an operator of offshore hedge funds for their alleged manipulation of the prices of microcap stocks in order to artificially inflate the NAV of the hedge funds. The complaint alleges the firms used a number of manipulative techniques, including matched orders, marking the close, and wash sales. The complaint alleges violation of anti-fraud provisions under the Securities Act, the Exchange Act, and the Advisers Act.
In addition, the SEC filed settled administrative proceedings against a trader at the broker-dealer and its chief compliance officer. The trader was alleged to have executed numerous manipulative trades and thus violated the anti-fraud provisions of the Exchange Act. The chief compliance officer (and AML compliance officer) was alleged to have reasonably supervised the trader and caused the firm to fail to file suspicious activity reports as required under the Bank Secrecy Act and Exchange Act Rule 17a-8.
Cross References
SEC Release 34-63964 (action against compliance officer)
SEC Release 34-63963 (action against trader)
Exchange Act §§ 10(b), 15(c), 17(a)
Exchange Act Rules 10b-5, 17a-8
Securities Act § 17(a)
Advisers Act § 206