Sidoti & Company has agreed to pay a $100,000 fine to settle SEC charges that Sidoti and its associated persons misused material nonpublic information in connection with an affiliated hedge fund that was under common control with Sidoti and operated by its founder and Chief Executive Officer.

The hedge fund, by design, invested in issuers covered by Sidoti’s research department and, additionally, some of the issuers for which Sidoti provided investment banking services - primarily small and microcap public companies.

Yet for a period of more than 8 months, from November 2014 to July 2015, Sidoti – which was established in 1999 as an independent research firm - apparently had no written policies or procedures in place as it pertained to those making investment decisions for an affiliated hedge fund that invested in issuers covered by Sidoti’s research department and some other issuers for which Sidoti provided investment banking services. 

The SEC cites 126 instances from 11/3/14 to 5/5/15, in which the hedge fund traded in a stock that appeared on the daily restricted list of issues for which Sidoti was involved in investment banking or marketing activities or the firm was publishing research on the security,

“Sidoti did not devote sufficient resources to set up the requisite trade surveillance and compliance systems and failed to meet its obligation to prevent the misuse of material nonpublic information.”  - -  Andrew Calamari, Director of SEC’s NY Regional Office.

[Click here to access ... SEC Order.]