Compliance
US Private Investment in Public Equity Deal Goes Sour
US broker/dealer, Friedman, Billings, Ramsey & Co, agreed to pay regulators more than $7.7 million yesterday to resolve charges relating to ...
US broker/dealer, Friedman, Billings, Ramsey & Co, agreed to pay regulators more than $7.7 million yesterday to resolve charges relating to improper share trading in for a private investment in a public equity deal that has so far netted the Securities Exchange Commission and NASD a total of $9.4 million in settlements.
The private investment in a public equity deal - only offered to “accredited” investors with assets of $1 million or more – involved the trading in Compudyne Corporation, a Maryland-based security firm.
According to US regulators, Friedman, Billings, Ramsey & Co failed to maintain an information barrier to prevent trading by the firm’s personnel after it structured the deal.
NASD imposed a fine of $4 million on the securities firm. In a separate settlement with the SEC, the company agreed to pay more than $3.7 million.
The action against Friedman, Billings, Ramsey & Co, announced yesterday, was the fourth enforcement action regulators have taken arising from the Compudyne private investment in a public equity deal, according to NASD.
In May 2005 NASD fined a hedge fund manager $375,000 to settle charges of fraud and insider trading, while the SEC ordered the hedge fund manager to pay a further $1 million in civil penalties, disgorgement of ill-gotten gains and interest.
Then in September 2006, NASD fined First New York Securities $100,000 – the securities firm where the hedge fund manager was registered – and at the same time NASD fined the hedge fund manager’s supervisor another $100,000 for supervisory failures.
In December 2005 NASD permanently barred and fined another hedge fund manager $125,000, also formerly with the securities firm, Friedman, Billings, Ramsey & Co, in connection with the same deal.
Cameron Funkhouser, senior vice president for the NASD department of market regulation said: "This settlement furthers NASD's efforts to prevent and deter abuses in the rapidly-growing market for PIPEs."
