SEC v. Steven B. Hart, Case No. 12-CIV-8986 (S.D.N.Y). On December 11, 2012, the SEC announced it filed a settled fraud action against hedge fund manager Steven Hart for engaging in trading schemes. According to the SEC, Hart caused the fund he managed, Octagon Capital Partners LP, to buy stock in small, thinly traded issuers at the going market price. He would then sell the same stock a day later to his employer’s fund at a price that was higher than the market price. Then, Hart would direct the employer’s fund to sell the stock on the open market at a loss. The SEC also alleges Hart engaged in insider trading. He was asked to invest in various issuers and then promised to maintain the confidentiality of information and not trade on it. Despite the promise, Hart traded based on the confidential information he received and made a substantial profit. To settle the SEC’s charges, Hart consented, without admitting or denying the allegations, to entry of a judgment enjoining him against violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act. Hart will also pay $831,071 in disgorgement, $103,424 in prejudgment interest, and a $394,733 civil monetary penalty.
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