The Securities and Exchange Commission believes that Nelson Obus, a hedge fund manager who traded on insider information about an anticipated merger between SunSource and another company, flaunted the information as opposed to being discreet, the Star Ledger reports.

The SEC alleges that in 2001, when Obus received insider information on Wall Street about a pending merger between SunSource and another company, he wasted no time. He instantly called SunSource's CEO and had a trader at Wynnefield Capital, a New York investment firm, buy 287,200 shares of SunSource before the merger announcement. In total, he made $1.3 million for the three hedge funds that he manages.

"It's representative of the increasing trend we've seen of improper trading by hedge funds," said Scott Friestad, associate director of enforcement at the SEC.

The SEC filed a lawsuit on Tuesday that also names Peter Black, a portfolio manager at Wynnefield Capital, and his friend Thomas Strickland, who supposedly made the tip.

Obus and Wynnefield claim that nothing they have done could be considered improper. They called the SEC's allegations "absolutely baseless."

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