Former hedge fund manager Hilary Shane has been permanently barred from associating with any NASD-registered firm and will pay more than $1.45 million to settle NASD and Securities and Exchange Commission charges of fraud and insider trading.
The settlement stems from an NASD filing against Shane in February, which sought sanctions against the investor for the October 2001 purchase and sale of shares in a private placement in the public equity, or PIPE, of Compudyne Corp., Dow Jones Newswires reports.
In the PIPE transaction, the NASD said Friedman, Billings, Ramsey & Co. offered investors--on a confidential basis--2.45 million shares of CompuDyne stock at a below-market price of $12 a share.
The NASD discovered that Shane, after agreeing to buy Compudyne PIPE shares, established a short position in the stock while in possession of non-public information and used the PIPE shares to cover the short position. The NASD also said Shane made false statements to obtain the right to acquire shares in the PIPE transaction.
The NASD's sanctions against Shane, who neither admitted nor denied the charges, include a permanent bar and a $375,000 fine.
SEC sanctions include a one-year suspension from associating with any investment adviser, disgorgement of more than $296,000 in profits from insider trading, disgorgement of more than $356,000 in profits from selling unregistered shares, a civil penalty of $296,785 and prejudgment interest of more than $125,000.
The NASD noted its investigation into other individuals and entities involved in the PIPE is continuing.
In early April, Friedman, Billings, Ramsey Co-Chief Executive and founder Emanuel Friedman said he would leave the company in June. The company, however, didn't disclose the reason for his departure.
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