Bloomberg – The U.S. Securities and Exchange Commission sued Lancaster Investment Partners LP and hedge-fund manager Robert Berlacher for alleged illegal trading that the agency said generated $1.7million in ill-gotten gains.<\/p>\n
Berlacher’s funds violated trading rules for at least 10 private stock offerings by public companies from 2000 through 2005, the SEC said in a case filed today in federal court in Philadelphia.<\/p>\n
Lancaster used so-called short shares of borrowed stock in conjunction with private investment in public equity offerings, or PIPEs, to lock in a guaranteed profit, the SEC said. His funds used shares received through each PIPE offering to replace the borrowed stock, a violation of securities rules.<\/p>\n
“These ill-gotten gains inflated Lancaster’s assets under management and performance, which consequently led Berlacher to receive improper performance fees and compensation,” the SEC said in its complaint.<\/p>\n
Regulators have been cracking down since last year on abuses in the $36 billion market for PIPEs. Investors, led by hedge funds, typically buy the unregistered securities, expecting the SEC will allow them to resell to the public.<\/p>\n