Arlington, Virginia-based investment firm
The charges, first brought last April, drew industry-wide attention because FBR, a brokerage, was charged with insider trading. SEC Enforcement Director Linda Thomsen said in a statement that brokerages should be especially keen to protect the private information with which they are entrusted.
Regulators claimed that Nichols and Friedman flouted procedures for managing confidential information. Neither Nichols nor Friedman admitted or denied wrongdoing.
FBR is among the largest underwriters of public offerings in the United States.
The CompuDyne deal was an offering for private investment in a public company, through which mutual funds and hedge finds buy stock, known as a PIPE deal. FBR sold $29 million worth of CompuDyne to a hedge fund group in October of 2001, a deal which regulators said the company sold CompuDyne short in its own account.
The trade earned FBR $343,773 in profit. The company also charged CompuDyne $1.7 million for underwriting.
This week, Friedman noted that the deal was the first such PIPE transaction the firm had ever handled. “I did not intend to violate any regulations or rules,” he said. “I regret the shortcomings in our handling of this PIPE.”
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.