FrontPoint Settlement
FrontPoint Partners Offers $33 million in Settlement with SEC
FrontPoint Partners has paid $33 million to settle brought by the Securities and Exchange Commission, but it won't come from investors. As we reported yesterday, former FrontPoint Partners fund manager Joseph F. "Chip" Skowron III has been charged with purchased inside information on a drug that saved him $30 million. In a letter to investors, FrontPoint assured investors that it would not have any financial impact on the firm.
FrontPoint, meanwhile, agreed to pay $29 million in disgorgement of avoided losses, and $4 million in prejudgment interest, without admitting or denying the allegations, the SEC said in a release. The proposed settlement is subject to court approval, it added.
The SEC said the disgorgement payment was for $30 million in losses avoided by the now dissolved FrontPoint Healthcare Funds when Skowron allegedly sold the funds' holdings of Human Genome Sciences Inc. (HGSI) based on a tip about bad results in a clinical trial.
The payment, FrontPoint said in the letter, will be funded by an amount set aside before FrontPoint was spun off from parent Morgan Stanley (MS). Morgan Stanley still has a minority stake in the hedge fund firm.
The investor letter, signed by Co-Chief Executives Dan Waters and Mike Kelly, said the decision to settle the matter "eliminates any future distractions from our focus on investing," and added that "the alleged conduct of the former portfolio manager is completely contrary to FrontPoint's principles and represents a clear violation of FrontPoint's policy against insider trading."
Related to: Hedge Fund Update
Tags: FrontPoint Settlement, FrontPoint Partners, FrontPoint Settlement with SEC, Joseph F. "Chip" Skowron III, Joseph F. "Chip" Skowron FrontPoint Partners
