NEW YORK - A former First New York Securities LLC hedge fund manager has agreed to pay $1.45 million to settle allegations that she traded on inside information that CompuDyne Corp. planned a private-equity offering.
Hilary Shane, 37, of New York settled with the NASD and the Securities and Exchange Commission without admitting or denying wrongdoing, the regulators said separately yesterday.
The SEC's case against Shane is the agency's second involving private investment in public equity, or PIPEs, since a former SG Cowen Securities Corp. managing director was sued April 21. Public companies seeking to raise cash quickly sometimes turn to investment bankers to arrange a PIPEs deal, in which a small group of investors, such as a hedge fund, buys newly created securities, often at a discount to the prevailing market price.
"This case is part of NASD's ongoing commitment to dealing with abuses in the marketing and trading of PIPE shares," NASD Vice Chairman Mary L. Schapiro said. "These abuses are serious and warrant serious sanctions."
CompuDyne and its placement agent, Friedman, Billings, Ramsey & Co., offered Shane's fund such a deal on a confidential basis. Shane sold CompuDyne shares short, after agreeing to buy the PIPE shares, and then used the PIPE shares once they were registered to cover her short position, regulators said.
Shane's lawyer, Theodore Altman, declined to comment. A call to First New York Securities wasn't returned.
Arlington, Va.-based Friedman, Billings said last month that it offered to pay $7.5 million to settle regulators' insider trading claims stemming from the same CompuDyne PIPEs transaction. Friedman, Billings is the No. 9 underwriter of U.S. initial stock sales.
CompuDyne, a maker of security systems, is based in Hanover, in Anne Arundel County.
Former SG Cowen Managing Director Guillaume Pollet, 40, pleaded guilty to insider trading for selling short shares of HealthExtras Inc. in 2001 after he learned the company planned a PIPE. In a related action, the SEC filed a civil lawsuit against Pollet, accusing him of fraud and insider trading in the sale of short shares of 10 companies involved in PIPEs.