U.S. SEC charges 23 firms in short-sale crackdown; 22 settle
Reuters – 3 hours ago
By Sarah N. Lynch
WASHINGTON (Reuters) - Twenty-two investment firms will collectively pay more than $14.4 million in sanctions to settle civil charges in connection with a broad crackdown by federal regulators into illegal short-selling practices, the U.S. Securities and Exchange Commission said on Tuesday.
The SEC said it had charged 23 firms for violating a rule that prohibits firms from shorting a stock within a five-day window of a public offering, and then buying the same security through the offering.
Only one of the 23 firms, G-2 Trading LLC, is fighting the charges through litigation.
The SEC also simultaneously issued a risk alert that seeks to highlight the enforcement cases as an example to warn the market against violating the short-selling restrictions, known as Rule 105 of Regulation M.
The prohibition against short-selling ahead of an offering and then buying the same stock in the offering is aimed at reducing the chances of market manipulation. The rule applies regardless of a trader's intent.
The SEC said the firms charged all bought shares from an underwriter, broker or dealer participating in a follow-on offering after they had shorted the stock during the restricted period.
Among the 22 firms that are settling the SEC's charges are D.E. Shaw & Co, Hudson Bay Capital Management, and the Ontario Teachers' Pension Fund Plan.
The other firms were as follows: Blackthorn Investment Group, Claritas Investments Ltd, Credentia Group, Deerfield Management Company, JGP Global Gestao de Recursos, M.S. Junior Swiss Capital Holdings and Michael A. Stango, Manikay Partners, Meru Capital Group, Merus Capital Partners, Pan Capital AB, PEAK6 Capital Management, Philadelphia Financial Management of San Francisco, Polo Capital International Gestao de Recursos, Soundpost Partners, Southpoint Capital Advisors, Talkot Capital, Vollero Beach Capital Partners, War Chest Capital Partners, and Western Standard.
All will pay a varying amount of fines, disgorgement and interest without admitting or denying the charges.
(Reporting by Sarah N. Lynch; Editing by Gerald E. McCormick and Leslie Adler)
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