The Jailhouse

[Ignutz]

Ex-Friedman Billings CEO Faces Civil Charges

Last week, former hedge fund manager Hilary Shane agreed to pay $1.45 million in fines and restitution after being charged by securities regulators with fraud and insider trading in the same PIPE deal. The settlement with Shane is the first one to emerge from a yearlong investigation into stock manipulation in the $14 billion market for PIPEs, which are used mainly by small, cash-strapped companies.

Securities regulators also have served Wells notices on Dreyer and Nichols, contending they aided and abetted wrongful activity.

To date, FBR has shed little light on the nature of violations alleged by regulators. People familiar with the investigation say it has focused on trading activity by FBR in shares of Compudyne in advance of the PIPE becoming public. The investment firm may have been shorting shares of Compudyne in order to profit from the typical decline in the shares of a company doing a PIPE deal.

Friedman's registration statement says "the activities being investigated include trading done in the subject issuer's stock on behalf of FBR (in a firm account)."

http://www.thestreet.com/pf/markets/matthewgoldstein/10225247.html