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Knight Capital unit may face SEC charges
Mon Jun 27, 2005 08:45 AM ET
NEW YORK (Reuters) - Knight Capital Group Inc. (NITE.O: Quote, Profile, Research) , one of the largest traders of Nasdaq-listed shares, on Monday said its asset management unit faces possible civil charges from the U.S. Securities and Exchange Commission over possible improper trading activity.
Knight said Deephaven Capital Management LLC and a former Deephaven employee received "Wells notices" from the SEC.
It said the notice to Deephaven indicates that SEC staff may recommend civil action alleging that the unit violated securities laws that are aimed at stopping fraud.
A call to the SEC was not immediately returned. Knight disclosed the Wells notices in an SEC filing. It did not name the former employee.
Knight said the case concerns trading activity associated with private investments in public equities, or PIPEs, from June 1, 1999 through March 2004.
In a letter to investors that Knight released in the filing, Deephaven said it believes the Wells notice results from an industrywide review that began last summer related to PIPEs transactions.
Deephaven said its PIPEs activities represented an "insignificant portion" of assets held by its Market Neutral Master Fund LP, which discontinued such investments by August 2004.
A Wells notice indicates the SEC may accuse the recipient of wrongdoing, and give the recipient a chance to respond. Deephaven said it is cooperating fully.
Knight is based in Jersey City, New Jersey. Deephaven has offices in Minnetonka, Minnesota. (Additional reporting by Karey Wutkowski)
