The court said that the British hedge fund firm and its chief executive must surrender $38.4m of profit, but the civil penalty in that amount must be slashed, as reported by Reuters.
This is one of the cases filed by the SEC following revelation of an industry wide investigation into market timing and ‘late trading’ in funds, which was exposed a decade ago by then-New York attorney general Eliot Spitzer.
Market timing involves rapid trading, while late trading involves the trading of fund shares after the market closes but at old prices, and both are considered as illegal practices in the financial industry.
Both the firm and its chief were accused for late trading from June 1999 to September 2003, and the US District Judge Robert Sweet in Manhattan found them liable in a non-jury trial.
Ordering the SEC to recalculate the monetary penalty, the appeals court said the fine must not be taken into consideration of the profit earned through late trading before the April 2008, when the SEC filed the case.
