The Securities and Exchange Commission sued New York hedge fund Colonial Investment Management in federal court Monday, charging the company with making more than $1.48 million from illegal trades, the Associated Press reports.

The SEC said the firm purchased registered offerings to cover short sales it bought within five business days prior, which is not allowed.

“Short sellers who violate the rule’s prohibitions can profit unfairly because they largely avoid exposure to market risk by using shares purchased at a discount in a registered offering to cover restricted period short sales,” the SEC said.

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