District Court Orders Market Timer to Pay $500K

The U.S. District Court for the Northern District of Illinois has ordered John M. Fife, a principal of Clarion Management, a hedge fund based in Chicago, to pay more than $500,000 in fees and disgorgement for having allegedly placed illegal market timing trades in 2002 and 2003. The court also barred him from working at an investment advisory firm for 18 months.

The judgment follows the Securities and Exchange Commission’s initial suit against Fife and Clarion in January.

The SEC said he created Clarion with the sole purpose of market timing international mutual fund sub-accounts in variable annuities. The SEC said he purchased variable annuity contracts issued by Lincoln National Life Insurance and used deceptive tactics to hide Clarion’s ownership of the annuities by created phony family trusts and limited liability companies as beneficiaries. When Lincoln imposed trading restrictions in 2002 when it discovered that it was actually Clarion that was the beneficiary of the contracts, Fife then surrendered the contracts and purchased additional ones under new trust and limited liability company names.