In re STEVEN B. HART
Exhibit of Steven B. Hart
summary
Steven B. Hart, unregistered investment adviser and manager of Octagon Capital Partners, defrauded clients through matched trades that inflated prices and insider trading on confidential PIPE offerings, resulting in a $1.33M penalty and permanent bar from the securities industry.
paragraph
Steven B. Hart, the sole owner and manager of unregistered Octagon Capital LLC and Octagon Capital Partners, engaged in two fraudulent schemes: executing 31 matched trades between 2008 and 2009 to inflate prices for his employer’s fund and trading in 19 securities using material nonpublic information from confidential private offerings between 2007 and 2011. He falsely certified compliance in two securities purchase agreements, violating Sections 17(a) of the Securities Act, 10(b) of the Exchange Act, and Sections 206(1) and 206(2) of the Advisers Act. Hart agreed to a federal court judgment imposing $831,071 in disgorgement, $103,424 in prejudgment interest, and a $394,733 civil penalty, and consented to a permanent bar from association with any investment adviser or broker-dealer under Section 203(f).
narrative
Steven B. Hart, president and sole owner of unregistered investment adviser Octagon Capital LLC and manager of Octagon Capital Partners, was found by the SEC to have committed securities fraud through two distinct schemes. First, from January 2008 to June 2009, he orchestrated 31 matched trades in thinly traded securities, deliberately causing his employer’s fund to pay inflated prices to benefit his own fund. Second, from June 2007 to March 2011, he traded in 19 issuers’ securities while in possession of material nonpublic information obtained from confidential private investments in public equity (PIPEs) and registered direct offerings, violating confidentiality agreements and falsely certifying in two purchase agreements that he had not traded ahead of public announcements. The SEC’s civil complaint led to a federal court judgment requiring Hart to pay $831,071 in disgorgement, $103,424 in prejudgment interest, and a $394,733 civil penalty. Without admitting or denying the allegations (except jurisdiction and the findings in Section III.2), Hart consented to a permanent bar from association with any investment adviser, broker, dealer, transfer agent, or related entity under Section 203(f) of the Investment Advisers Act. His reapplication for industry association is contingent upon satisfying all financial obligations and meeting regulatory conditions.
Classified investment-adviser-fraud(confidence 100%). EDGAR detection: forms ADV/ADV-E/ADV-W/Form D· recall 33% / precision 13%. detection rule →
Statutes
Parties
Securities and Exchange Commissionadministrative proceedingsfinal judgment against hartfraudulent trading schemesmatched tradesoctagon capital llcpresident of octagon capital llcsteven b. hart
Keywords
hartcommissionoctagon capitalcapital partnerssecuritiesinvestmentsteven hartoctagoncapitalorderadvisersproceedingssecurities exchangeinvestment adviserspartners
Extracted insights
Dollar amounts 3
- $831K $831,071 $100K–$1M
- $395K $394,733 $100K–$1M
- $103K $103,424 $100K–$1M
Entities 9
- person administrative proceedings
- person final judgment against hart
- person fraudulent trading schemes
- person matched trades
- company octagon capital llc
- company president of octagon capital llc
- agency Securities and Exchange Commission
- person steven b. hart
- court united states district court
Triples 19
- Steven B. Hart engaged in two fraudulent trading schemes, one involving matched trading and the other involving insider trading ahead of certain confidentially marketed offerings
- Steven B. Hart directed thirty-one matched trades in the securities of certain companies from January 17, 2008 to June 4, 2009
- Steven B. Hart is liable to pay disgorgement of $831,071, plus prejudgment interest of $103,424, and a civil penalty of $394,733
- Steven B. Hart was employed as a portfolio manager from January 2006 to April 2011 providing investment advice for various investment funds
- Octagon Capital LLC has never been registered with the Commission in any capacity
- Steven B. Hart held Series 7 and 63 licenses and was associated with two broker-dealers registered with the Commission
- Steven B. Hart submitted Offer of Settlement
- Securities and Exchange Commission instituted administrative proceedings
- Steven B. Hart consents entry of Order
- Steven B. Hart is president of Octagon Capital LLC
- Octagon Capital LLC has never been registered
- Steven B. Hart held Series 7 and 63 licenses
- Steven B. Hart was associated with broker-dealers
- United States District Court entered final judgment against Hart
- Steven B. Hart is liable $831,071 disgorgement
- Steven B. Hart is liable $103,424 prejudgment interest
- Steven B. Hart is liable $394,733 civil penalty
- Steven B. Hart engaged fraudulent trading schemes
- Steven B. Hart directed matched trades
PDF
Text layers
Extracted body text (6,538c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
INVESTMENT ADVISERS ACT OF 1940
Release No. 3524 / December 20, 2012
ADMINISTRATIVE PROCEEDING
File No. 3-15150
In the Matter of
STEVEN B. HART,
Respondent.
ORDER INSTITUTING
ADMINISTRATIVE PROCEEDINGS
PURSUANT TO SECTION 203(f) OF THE
INVESTMENT ADVISERS ACT OF 1940,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the
public interest that public administrative proceedings be, and hereby are, instituted pursuant to
Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”) against Steven B. Hart
(“Hart”).
II.
In anticipation of the institution of these proceedings, Hart has submitted an Offer of
Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to
which the Commission is a party, and without admitting or denying the findings herein, except as
to the Commission’s jurisdiction over him and the subject matter of these proceedings and the
findings contained in Section III.2 below, which are admitted, Hart consents to the entry of this
Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment
Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (the “Order”), as set
forth below.
2
III.
On the basis of this Order and Hart’s Offer, the Commission finds that:
1. Hart is the president, investment manager, portfolio manager, and sole owner
and employee of Octagon Capital LLC, which is the general partner and manager of Octagon
Capital Partners, LP (“Octagon Capital Partners”), an investment fund. Octagon Capital LLC and
Octagon Capital Partners have never been registered with the Commission in any capacity. Hart
was also employed as a portfolio manager from January 2006 to April 2011, providing investment
advice for various investment funds (the “employer’s funds”). Hart previously held Series 7 and 63
licenses and was associated with two broker-dealers that were registered with the Commission.
Hart is 40 years old and is a resident of New York, New York.
2. On December 13, 2012, a final judgment was entered by consent against
Hart in the civil action entitled Securities and Exchange Commission v. Steven B. Hart, Civil
Action Number 12-CV-8986 (JPO), in the United States District Court for the Southern District of
New York, permanently enjoining Hart from violating Section 17(a) of the Securities Act of 1933
and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections
206(1) and 206(2) of the Advisers Act. Under the final judgment, Hart is liable to pay disgorgement
in the amount of $831,071, plus prejudgment interest thereon in the amount of $103,424, and a civil
penalty in the amount of $394,733.
3. The Commission’s complaint against Hart alleged that, in connection with
Hart’s management of Octagon Capital Partners and the provision of investment advice to one of
his employer’s funds, Hart engaged in two fraudulent trading schemes, one involving matched
trading and the other involving insider trading ahead of certain confidentially marketed offerings.
As to the matched trading, the complaint further alleged that, from January 17, 2008 to June 4,
2009, Hart directed thirty-one matched trades in the securities of certain thinly traded issuers,
intentionally causing his employer’s fund to pay inflated prices for the securities to Octagon Capital
Partners. Through this scheme, Hart benefitted Octagon Capital Partners at the expense of his
employer’s fund. The complaint further alleged that, from June 19, 2007 through March 15, 2011,
Hart, on behalf of Octagon Capital Partners, traded the securities of nineteen issuers while in the
possession of material nonpublic information. Generally, as to these issuers, Hart had been solicited
to invest in their private investments in public equity (PIPEs), registered direct offerings, or
confidentially marketed public offerings, and had agreed to keep confidential the information
related to these offerings and not trade the issuers’ securities until the offerings were publicly
announced. Additionally, the complaint alleged that in two instances, Hart had signed a securities
purchase agreement in which he falsely represented that, after being solicited, he had not traded the
issuer’s securities in the days leading up to the public announcement of the transaction.
3
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to
impose the sanctions agreed to in Hart’s Offer.
Accordingly, it is hereby ORDERED pursuant to Section 203(f) of the Advisers Act that
Hart be, and hereby is:
barred from association with any investment adviser, broker, dealer, municipal securities
dealer, municipal advisor, transfer agent, or nationally recognized statistical rating
organization.
Any reapplication for association by Hart will be subject to the applicable laws and
regulations governing the reentry process, and reentry may be conditioned upon a number of
factors, including, but not limited to, the satisfaction of any or all of the following: (a) any
disgorgement ordered against Hart, whether or not the Commission has fully or partially waived
payment of such disgorgement; (b) any arbitration award related to the conduct that served as the
basis for the Commission order; (c) any self-regulatory organization arbitration award to a
customer, whether or not related to the conduct that served as the basis for the Commission order;
and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct
that served as the basis for the Commission order.
By the Commission.
Elizabeth M. Murphy
Secretary
OCR text (6,099c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
INVESTMENT ADVISERS ACT OF 1940
Release No. 3524 / December 20, 2012
ADMINISTRATIVE PROCEEDING
File No. 3-15150
In the Matter of
STEVEN B. HART,
Respondent.
ORDER INSTITUTING
ADMINISTRATIVE PROCEEDINGS
PURSUANT TO SECTION 203(f) OF THE
INVESTMENT ADVISERS ACT OF 1940,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the
public interest that public administrative proceedings be, and hereby are, instituted pursuant to
Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”) against Steven B. Hart
(“Hart”).
II.
In anticipation of the institution of these proceedings, Hart has submitted an Offer of
Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to
which the Commission is a party, and without admitting or denying the findings herein, except as
to the Commission’s jurisdiction over him and the subject matter of these proceedings and the
findings contained in Section III.2 below, which are admitted, Hart consents to the entry of this
Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment
Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (the “Order”), as set
forth below.
2
III.
On the basis of this Order and Hart’s Offer, the Commission finds that:
1. Hart is the president, investment manager, portfolio manager, and sole owner
and employee of Octagon Capital LLC, which is the general partner and manager of Octagon
Capital Partners, LP (“Octagon Capital Partners”), an investment fund. Octagon Capital LLC and
Octagon Capital Partners have never been registered with the Commission in any capacity. Hart
was also employed as a portfolio manager from January 2006 to April 2011, providing investment
advice for various investment funds (the “employer’s funds”). Hart previously held Series 7 and 63
licenses and was associated with two broker-dealers that were registered with the Commission.
Hart is 40 years old and is a resident of New York, New York.
2. On December 13, 2012, a final judgment was entered by consent against
Hart in the civil action entitled Securities and Exchange Commission v. Steven B. Hart, Civil
Action Number 12-CV-8986 (JPO), in the United States District Court for the Southern District of
New York, permanently enjoining Hart from violating Section 17(a) of the Securities Act of 1933
and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections
206(1) and 206(2) of the Advisers Act. Under the final judgment, Hart is liable to pay disgorgement
in the amount of $831,071, plus prejudgment interest thereon in the amount of $103,424, and a civil
penalty in the amount of $394,733.
3. The Commission’s complaint against Hart alleged that, in connection with
Hart’s management of Octagon Capital Partners and the provision of investment advice to one of
his employer’s funds, Hart engaged in two fraudulent trading schemes, one involving matched
trading and the other involving insider trading ahead of certain confidentially marketed offerings.
As to the matched trading, the complaint further alleged that, from January 17, 2008 to June 4,
2009, Hart directed thirty-one matched trades in the securities of certain thinly traded issuers,
intentionally causing his employer’s fund to pay inflated prices for the securities to Octagon Capital
Partners. Through this scheme, Hart benefitted Octagon Capital Partners at the expense of his
employer’s fund. The complaint further alleged that, from June 19, 2007 through March 15, 2011,
Hart, on behalf of Octagon Capital Partners, traded the securities of nineteen issuers while in the
possession of material nonpublic information. Generally, as to these issuers, Hart had been solicited
to invest in their private investments in public equity (PIPEs), registered direct offerings, or
confidentially marketed public offerings, and had agreed to keep confidential the information
related to these offerings and not trade the issuers’ securities until the offerings were publicly
announced. Additionally, the complaint alleged that in two instances, Hart had signed a securities
purchase agreement in which he falsely represented that, after being solicited, he had not traded the
issuer’s securities in the days leading up to the public announcement of the transaction.
3
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to
impose the sanctions agreed to in Hart’s Offer.
Accordingly, it is hereby ORDERED pursuant to Section 203(f) of the Advisers Act that
Hart be, and hereby is:
barred from association with any investment adviser, broker, dealer, municipal securities
dealer, municipal advisor, transfer agent, or nationally recognized statistical rating
organization.
Any reapplication for association by Hart will be subject to the applicable laws and
regulations governing the reentry process, and reentry may be conditioned upon a number of
factors, including, but not limited to, the satisfaction of any or all of the following: (a) any
disgorgement ordered against Hart, whether or not the Commission has fully or partially waived
payment of such disgorgement; (b) any arbitration award related to the conduct that served as the
basis for the Commission order; (c) any self-regulatory organization arbitration award to a
customer, whether or not related to the conduct that served as the basis for the Commission order;
and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct
that served as the basis for the Commission order.
By the Commission.
Elizabeth M. Murphy
Secretary