By Sarah N. Lynch
WASHINGTON, Sept 17 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
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
All will pay a varying amount of fines, disgorgement and
interest without admitting or denying the charges.