New York (HedgeCo.Net) – After six years of litigation, the SEC has resolved a case against defendant hedge fund manager Bruce Alpert of Gabelli Funds LLC. The Commission has agreed to dismiss its charges against Alpert.
The SEC’s complaint alleged that a hedge fund had been authorized to place market timing trades in the Gabelli Global Growth Fund (GGGF), a fund advised by Gabelli Funds, in exchange for an investment in a hedge fund advised by an affiliate of Gabelli Funds.
“Market-time” trading is premised on the fact that price movements during the New York trading day can cause corresponding movements in the international markets that will not be incorporated into new stock prices until the following day. Traders can then buy and sell at artificially low and high prices, respectively.
The complaint also alleged that Alpert wrote a memorandum in September 2003 that was designed to assure investors that Gabelli Funds did not have a market timing problem. However, the memorandum gave the misleading impression that any failure to exclude market timers resulted from procedural limitations, not intentional conduct.
On September 3, 2003, the New York Attorney General announced an inquiry into market-timing. On April 24, 2008, the SEC sued the defendants and alleged that Gabelli and Alpert knew of Headstart’s market-timing but deliberately mislead GGGF’s Board and shareholders in violation of the Securities and Exchange Act of 1934. The district court dismissed the SEC’s claims for failure to bring the suit within the five-year statute of limitations, and the SEC appealed.
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
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