SEC settles six short selling cases for $2.5m 20 October 2015 Washington Reporter: Drew Nicol
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The US Securities and Exchange Commission (SEC) will collect $2.5 million from six firms that settled cases of violations of Rule 105 of Regulation M.
Rule 105 prohibits short selling within five business days of participating in a stock offering.
Such dual activity results in illicit profits by artificially depressing the market price shortly before the company prices the stock.
J.P. Morgan Investment Management received the lion’s share of the fine, with more than $1 million levied against the firm.
The fine is made up of a disgorgement, prejudgment interest and a penalty.
Auriga Global Investors, Harvest Capital Strategies, Omega Advisors, Sabby Management and War Chest Capital Partners took on the rest of the total fine.
War Chest Capital Partners is also barred from participating in stock offerings for a year as a penalty for repeated Rule 105 violations.
The Rule 105 initiative was introduced by the SEC’s enforcement division in 2013 to address violations and promote a message of zero tolerance.
Rule 105 violations dropped by approximately 90 percent in the year after the initiative was announced, compared to the previous six years, according to the SEC.
Over 2013 and 2014, the SEC brought legal action worth $23.4 million against 42 firms.
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