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.
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.
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.
“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.
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.
