Sextant Trading Ban Extended Again

Date: Wednesday, June 17, 2009
Author: FINalternatives

For the third time, Canadian regulators have extended its trading ban against a prominent Toronto hedge fund.

The Ontario Securities Commission ordered Sextant Capital Management to continue to refrain from trading until Sept. 17. The OSC first issued its trading ban in December; the agency said that the latest extension was necessitated by Sextant’s refusal to produce certain records and documents for OSC’s investigation into the firm.

The regulator has charged Sextant founder Otto Spork, his daughter Natalie, Sextant’s president, and Robert Levack, the firm’s chief compliance officer, with illegal self-dealing and inflating the value of the firm’s Strategic Opportunities Hedge Fund. According to the OSC, Sextant inflated the value of Strategic Opportunities and two offshore hedge funds by investing in a pair of private companies with rights to develop Icelandic glaciers. The regulator says that 95% of the hedge fund’s assets are invested in the companies, which are themselves almost totally owned by Spork and the Sextant funds.

Spork has vowed to vigorously defend the allegations. Sextant said the fund was up 159% through the first 11 months of last year before the OSC imposed the ban, and complained about the amount of time the investigation was taking, calling it “unfair.” The hedge fund asked that the trading ban end in July or August.

Spork attorney Kevin Richard complained about the delays “when the OSC made the allegations six months ago.”

“They should be able to prove them in short order,” he told the Globe and Mail.