Zurich Capital has settled with the Securities and Exchange Commission for having provided financing to four of its hedge fund clients for the purpose of market timing mutual funds. The firm is paying a $16.8 million fine, consisting of $12.8 million in disgorgement and a $4 million penalty, all of which will be distributed to the mutual funds that were harmed as a result of the market timing.
“By knowingly financing their hedge fund clients’ deceptive market timing, ZCM reaped substantial fees at the expense of long-term mutual fund shareholders,” said Mark Schonfeld, director of the SEC’s New York regional office. “Because of ZCM’s attractive financing arrangement and its willingness to create a number of anonymous special purpose vehicles for its hedge fund clients, the hedge funds were able to inflate their trading profits from their deceptive conduct.”
Zurich Capital, which is currently winding down its operations, consented to the order without admitting or denying the charges.