WASHINGTON (Dow Jones/AP) – The Securities and Exchange Commission said Wednesday that it settled with hedge fund adviser Sandell Asset Management Corp. for $8 million over improper short sales made in the wake of Hurricane Katrina.
The SEC said the firm moved aggressively in the days after the storm to sell short its Hibernia Corp. holdings because of concerns that Capital One Financial Corp. would lower its proposed acquisition price for the New Orleans-based bank because of the massive damage to the area.
In doing so, the commission said the New York-based fund improperly marked certain sales of Hibernia shares as ”long”, even though the fund was selling the shares short.
Additionally, the commission said Sandell personnel lied to the broker-dealers executing additional trades that they had located Hibernia stock to borrow to make the trades.
”By mismarking certain trades and falsely claiming that firm personnel had located stock to borrow, Sandell Asset Management gained an unfair trading advantage over other market participants,” said Scott W. Friestad, associate director of the SEC’s division of enforcement.
Sandell Asset Management and its top executives agreed to pay more than $8 million to settle the charges, though neither the firm nor its personnel admitted or denied wrongdoing. The settlement included a civil fine of $650,000 for the firm, and a penalty of $190,000 for top executives, including CEO Thomas Sandell.