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The Morning Brief: Vicis Founder Slapped With $2.9 Million Fine

A hedge fund founder agreed to pay more than $2.9 million to settle Securities and Exchange Commission charges that he engaged in transactions that had a financial conflict of interest. The SEC alleges that Shadron Stastney — a co-founder of New York City-based Vicis Capital, which once managed as much as $5 billion but is now down to $230 million and has been winding down for several years — authorized Vicis to pay about $7.5 million for a basket of illiquid securities in which he had a partial stake.

“Stastney failed to tell [Vicis] or any other partners and management at the firm that he had a financial stake in some of the same securities sold into the fund,” stated the regulator. “Stastney personally benefited and received a portion of the proceeds from the sale, and therefore was trading as a principal in the transaction.” Under the settlement, Stastney has agreed to disgorge more than $2 million and pay prejudgment interest of more than $501,000 and a penalty of $375,000. Stastney also is barred from the investment business for at least 18 months.

Credit Suisse repeated its $5.50 target price and its Underperform rating on Emulex after having a meeting with the company’s management, including chief executive Jeff Benck and CFO Mike Rockenbach. It told clients in a note that the shares are trading at a “significant premium” to its storage component peers. Its stance on the stock is significant, given that activist hedge fund Starboard Value on Monday disclosed it had sent a letter to Benck and directors asserting that the stock is extremely undervalued and urging the company to take steps to unlock the value. In its note, Credit Suisse did acknowledge “Emulex remains committed to returning cash to shareholders.”

The Newedge CTA and Trend Indices fell 1.75 percent and 2.53 percent, respectively, in August. The best performing strategy this year through August continues to be the Newedge Commodity Trading Index (Equity), which has gained 13.30 percent. “Trading environments for directional strategies, and particularly trend-followers, remain challenging,” acknowledges Ryan Duncan, global co-head of Newedge’s Advisory Group for Alternative Investment Solutions, in a press release. Newedge points out that the Trend Index has dropped 9.51 percent since April alone after starting the year strongly. As a result, the Trend Index is now down 2.56 percent for the year to date. Among the top performing CTAs during August included P/E Investments (FX Aggressive), up 1.50 percent; Quantitative Investment Management (Global), up 1.30 percent; and Skandinaviska Enskilda (SEB Asset Sel.), down 0.15 percent. The top performing Trend funds in August were Man Investments (AHL Diversified), down 0.30 percent; Campbell & Co. (FME Large), down 1.10 percent; and Brevan Howard Systematic Trading (B), down 1.24 percent.

Several stocks in the cross-hairs of the smart money hedge fund set fared well on Wednesday:

  • Microsoft closed up 1.2 percent, at $33.32.
  • Apple jumped 2.1 percent, to $464.74.
  • Google surged 2 percent, to $903.67.
  • Green Mountain Coffee Roasters rose about 0.90 percent, to $86.59.
  • Safeway rose another 1.3 percent, to $31.39.

On the other hand, Sears holdings dropped 3.90 percent, to close at $59.63. Herbalife, however, was quiet, closing essentially unchanged at $73.25.

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