Fontana Capital charged
11 January 2011 Boston
Image: Shutterstock
Hedge Fund Fontana Capital and its manager Forrest Fontana have been charged by US regulators over alleged short selling violations.
The SEC says the fund earned over $1 million by breaking short selling rules involving three financial stocks, XL Capital, Merrill Lynch and Wells Fargo.
The SEC alleges that the short selling of those stocks breached Regulation M, which prohibits investors from participating in public offerings after having shorted the same securities.
Fontana's lawyer said the breach was a technical one and no fraud has been committed. Lisa Wood said the issue relates to "isolated, inadvertent, technical violations of Rule 105." "We disagree over the measure of damages."
If found guilty, Fontana - who is currently not managing a hedge fund - may be required to repay all the profits made on the trades, as well as facing further penalties.
The SEC says the fund earned over $1 million by breaking short selling rules involving three financial stocks, XL Capital, Merrill Lynch and Wells Fargo.
The SEC alleges that the short selling of those stocks breached Regulation M, which prohibits investors from participating in public offerings after having shorted the same securities.
Fontana's lawyer said the breach was a technical one and no fraud has been committed. Lisa Wood said the issue relates to "isolated, inadvertent, technical violations of Rule 105." "We disagree over the measure of damages."
If found guilty, Fontana - who is currently not managing a hedge fund - may be required to repay all the profits made on the trades, as well as facing further penalties.
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