WEST PALM BEACH, FL (HEDGECO.NET) – The Securities and Exchange Commission [SEC] is seeking information from hedge fund investments in the so-called �PIPE transactions�. According to reports from DowJones Newswire, an unidentified SEC spokesman said, �It’s an area where we’ve heard complaints from market participants, so we want to check it out.�

According to the news report, the SEC office of compliance is requesting documents for 20 hedge fund companies, in connection with the PIPE transactions. Some hedge funds were introduced to PIPE companies by brokerage firms; subsequently such hedge funds may have engaged in unspecified trades, and the SEC office wants to look into the timing of such investments, and to see if short selling resulted from such activities.

Robert Kyle, an executive vice president at Sagient Research Systems (SRYS), a San Diego firm whose PlacementTracker.com monitors PIPE deals said, �Potential stock manipulation by the hedge funds seems to be what the SEC is looking for,� according to him.

The SEC could seek documentation from brokerage firms, which are regulated by the SEC. Such information will be easier to obtain from brokerage firms than from unregulated hedge funds, which may be domiciled in offshore jurisdictions.

Hedge funds have traditionally invested in PIPE deals; however shareholders dislike such deals, because of the tendency to push stock prices down. Hedge funds often engage in short selling as a legitimate strategy of profiting from declining stocks.

The SEC seems to be dedicating its full investigative powers on hedge funds. Such investigations have not always found wrongdoing, as was the case against Clinton hedge funds whose case was later dismissed by the SEC. Ron Geffner, a partner with the New York law firm of Sadis & Goldberg, whose clients include hedge funds and other private investment vehicles, said that hedge funds are not the only investors in PIPE deals. According to Geffner, an SEC investigation into such a matter involving communications between the hedge funds and brokerage firms �might be another example of bias against the hedge fund industry.�

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]

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