The US Securities and Exchange Commission has imposed its first significant penalty as part of an extensive investigation into activist short sellers, fining Anson Funds Management and Anson Advisors a combined $2.5m, according to a report by Bloomberg.
The commission accused Anson of concealing payments totalling $1.1m to an unidentified publisher of bearish research, with the firm’s hedge fund allegedly generating over $4m in gains in late 2018 by coordinating with the researcher on the timing of negative reports and social media posts.
Although the SEC did not name the researcher, it noted that the party involved criticised Namaste Technologies and India Globalization Capital in September and October of that year. These dates and companies align with bearish reports and postings from short-seller Andrew Left’s Citron Research.
Left has not been accused of any wrongdoing, while Anson settled the SEC’s charges without admitting or denying the allegations.
This SEC’s probe into the relationships between hedge funds and sceptical researchers began three years ago, with the aim of gathering information on dozens of money managers and activists, as well as transactions involving more than 50 stocks. Sources at the time indicated that authorities were looking for evidence of short sellers collaborating to improperly drive down stock prices, with Anson among the lesser-known names under scrutiny.
Moez Kassam, Anson’s founder and principal, defended the firm’s actions, stating that the bearish views on both companies were eventually validated with the shares of the firm, which have since changed their names, now trading below their prices from that time.
Kassam said: “Anson’s involvement not only benefited our own investors but also the broader market.
“The SEC made no allegations that Anson ever disseminated any false or misleading information, engaged in inappropriate trading, or breached its fiduciary duty to its investors.”
The SEC did however criticise Anson for failing to disclose key details in its communications with potential investors and said that the firm should have informed investors about its collaboration with activist researchers and the profit-sharing arrangements.
