The Securities and Exchange Commission is on a three case losing streak in its attempts to sue hedge-fund managers who close out short positions with stock bought through private placements.
Since October, judges in three cases rejected the U.S. Securities and Exchange Commission's argument that closing out short positions with shares bought in private offerings is illegal. The SEC sued hedge-fund managers that engaged in the transactions.
``If the SEC losses are ultimately upheld, they're going to result in funds' being able to short more easily,'' said Steven Siesser, a partner at law firm Lowenstein Sandler in New York who counsels placement agents and investors in sales of ``private investment in public equity,'' or PIPEs.
The federal agency also argues in the three cases that the managers violated insider-trading laws by shorting stock before a private sale was announced. Prosecutors make a similar claim in a criminal case.
It's vaguely reassuring to see courts discovering that there may actually be limits to insider trading laws.
SEC Struggles to Pin Insider Trading on Fund Sales [Bloomberg]