Hedge fund agrees to $40M settlement

Hedge fund agrees to $40M settlement

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NEW YORK — A hedge fund agreed Wednesday to pay $40 million to settle allegations that it engaged in illegal trading practices with mutual fund companies, including making deals after the market had closed for the day.

Such practices are widespread and may cost small investors billions of dollars industrywide, New York's attorney general said.

Canary Capital Partners LLC and its managers agreed to relinquish $30 million in illicit profits and pay a $10 million penalty, Attorney General Eliot Spitzer said. The hedge fund's officials also agreed to cooperate with an investigation of mutual funds.

Spitzer's investigation found evidence that mutual fund managers permitted certain companies to engage in practices known as "late trading" and "market timing" in exchange for millions in payments and other inducements.

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