Luv it !!! GLG Settles Short-Selling Accusations
Hedge-Fund Giant
To Pay $3.2 Million
For Covering Tactic
By GREGORY ZUCKERMAN and JUDITH BURNS
June 27, 2007; Page C2 - Wall Street Journal
Just a day after agreeing to an unconventional deal to go public, London-based hedge-fund giant GLG Partners LP settled U.S. accusations of illegal short selling, the latest black eye for the high-profile firm.
GLG, one of Europe's largest hedge-fund firms, will pay more than $3 million to settle claims of illegal short selling in connection with 14 public offerings, the Securities and Exchange Commission announced. GLG made more than $2 million in illegal profits in four of its managed hedge funds by violating rules that prohibit covering short sales with securities obtained in a public offering, the SEC said.
GLG settled without admitting or denying the allegations. It agreed to a cease-and-desist order and will turn over more than $3.2 million in allegedly ill-gotten gains, interest and penalties, according to the SEC.
Regulators said they considered "remedial acts" by GLG and its cooperation in the investigation when they accepted the settlement.
"We are pleased to have reached this settlement with the SEC and to put this matter behind us," GLG spokesman Rupert Younger said. "We cooperated fully with the SEC since the moment the trades were brought to our attention, and we have taken a number of steps to ensure that similar technical violations do not occur again."
Someone close to GLG said the firm wasn't aware of the rule at the time of the alleged infractions.
Short sellers borrow shares to sell in hopes of replacing them later at a lower price. An SEC rule in place at the time of the trades banned buying shares in a public offering to cover a short sale made within five business days before the pricing of the offering. According to the SEC, GLG violated the short-selling ban 16 times from mid-2003 through May 2005, in public offerings for stocks including ChipMos Technologies Ltd., Petco Animal Supplies Inc. and Nextel Partners Inc.
GLG plans to sell itself in a reverse-takeover deal with Freedom Acquisition Holdings Inc. that will allow it to trade on the New York Stock Exchange, with shares valued at $3.4 billion.
Last week, France's stock-market regulator fined GLG €1.5 million ($2 million) for allegedly misusing information in a convertible-bond sale by Vivendi SA in November 2002. GLG, one of four hedge funds to be fined, said it intends to appeal the ruling.
Last year, the United Kingdom's Financial Services Authority fined GLG and one of its star managers, Philippe Jabre, £750,000 ($1.5 million) each in connection with improper trading in the securities of Sumitomo Mitsui Financial Group Inc. Mr. Jabre left the firm and has since opened a large hedge fund in Geneva. GLG says it has revamped its operations since Mr. Jabre's departure.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com and Judith Burns at judith.burns@dowjones.com
