Legal
SEC

SEC Charges Miami Trader with Insider Trading, Illegal Short Sales Ahead of PIPE Offering

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The SEC has settled a case against a Miami stock trader who it accused of trading on inside information and illegal short sales ahead of PIPE and follow-on offerings. It is the latest enforcement action by the agency against investment firms engaged in short sales around public offerings that violate Rule 105 of Regulation M of the Exchange Act. In late September the agency charged 23 firms with Rule 105 violations. In the current case, the SEC accused Charles Raymond Langston III of selling short 29,000 shares of AutoChina International (AUTCF), a Chinese-based commercial-vehicle company that went public in a reverse merger in 2009, after learning of a planned $70 million registered direct offering being marketed by placement agents Rodman & Renshaw and Chardan Capital Markets. Langston made $193,000 in profits from the illegal trades, which occurred in 2010.

Legal
GLG Partners

GLG Pays $9M to Settle SEC Charges of Over-Valuing Assets

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GLG Partners, the $28 billion London-based hedge fund unit of the Man Group, has agreed to pay $8.95 million to settle charges by the SEC that the fund manager inflated the value of a private company held in its emerging markets fund. The settlement is the latest fallout from the agency’s now four-year old Aberrational Performance Inquiry, begun in the depths of the financial crisis that seized up the hedge fund market beginning in late 2008. The inquiry has embroiled several hedge funds that were active in emerging growth company finance including NIR Group, Southridge Investment Group, and Yorkville Advisors. The SEC charged that GLG lacked the internal controls to ensure that evolving information about the companies it held in its private equity funds was properly transmitted to its valuation committee. The case involved an investment in a Chinese coal company held in the GLG Emerging Markets Special Assets 1 Fund, during the period of November 2008 to November 2010.

Markets

Lesser-Known and Established Funds Differ on Ads

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Private funds received the same marketing freedoms as operating companies and startups when the Securities and Exchange Commission lifted the ban on general solicitation in September. But while small business proponents heralded the ban’s end as a transformative capital raising event, private funds have remained a bit more circumspect. A review of Form D submissions over the last several weeks indicates that while it’s not uncommon to see two or three fund filings each day declaring that sponsors have elected to use general solicitation by checking the Rule 506(c) box, most pooled investment funds continue to conduct offerings without the broad marketing option. Observers largely agree that emerging or lesser-known midlevel managers are most likely to market their offerings initially. At some point, however, large funds will begin to advertise in an effort to enhance their brand, they maintain.

Markets
ACE NYSE

Exchanges Gear Up to Help Private Companies Raise Capital

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The NYSE Euronext is making a move to help private emerging growth companies raise capital. After a lengthy search the exchange chose an unknown technology company to partner with called ACE that was started by three Citibank executives. The goal is to show accredited investors a variety of companies looking for nearly any type of financing via an online marketplace. Peter Williams, CEO of ACE, told Growth Capital Investor he thinks if he can show investors some transparency about how the issuers are building their business and growing their revenue his platform will create an opportunity for small cap companies to successfully complete financing because their deals will reach more investors. ACE’s challenge was to convince midsize investment banks to share their deal flow opportunities, in a business characterized by backroom dealmaking and secrecy controlled by placement agents and their favored investor groups.