SEC settles with Toronto investment adviser Murchinson over short-selling violations
18 August 2021 US
Image: CuriosoPhotography/adobe.stock.com
The Securities and Exchange Commission (SEC), the US financial services regulator, has charged Canadian investment firm Murchinson Ltd with breaches of its short-selling rules.
The charges were laid against the investment advisory company, its principal Marc Bistricer and its trader Paul Zogala, and relate to infringement of Regulation SHO, which aims to protect the US market against uncovered short selling and other illegal trading practices.
The US regulator said that the firm and the two respondents had provided erroneous order marking information on orders of a hedge fund client, marking trades as “long” that should have been marked as short sales, thereby violating Regulation SHO.
This was repeated for hundreds of sale orders between June 2016 and October 2017. In providing inaccurate information, the respondents caused the hedge fund’s executing broker to fail to borrow or locate shares prior to executing the sales.
Murchinson and Bistricer also settled charges that they had caused the hedge fund to engage in dealer activity without registering with the SEC, violating dealer registration requirements of the Securities and Exchange Act of 1934.
Murchinson Ltd and Bistricer agreed to repay US$7,000,000 in gains that had been acquired through illegal practices (‘disgorgement’), along with a pre-judgement interest of US$1,078,183.
Murchinson agreed to pay a penalty of US$800,000, with Bistricer and Zogala paying penalties of US$75,000 and US$25,000 respectively.
Murchison and Bistricer also agreed to action that would ensure future compliance with Regulation SHO.
Speaking to SFT, a Murchinson spokesperson said: "We are pleased to have resolved this highly technical matter".
Having contacted SFT, the spokesperson was unwilling to provide further explanation of why this was a "highly technical matter", or why the company failed to prevent these regulatory violations.
The charges were laid against the investment advisory company, its principal Marc Bistricer and its trader Paul Zogala, and relate to infringement of Regulation SHO, which aims to protect the US market against uncovered short selling and other illegal trading practices.
The US regulator said that the firm and the two respondents had provided erroneous order marking information on orders of a hedge fund client, marking trades as “long” that should have been marked as short sales, thereby violating Regulation SHO.
This was repeated for hundreds of sale orders between June 2016 and October 2017. In providing inaccurate information, the respondents caused the hedge fund’s executing broker to fail to borrow or locate shares prior to executing the sales.
Murchinson and Bistricer also settled charges that they had caused the hedge fund to engage in dealer activity without registering with the SEC, violating dealer registration requirements of the Securities and Exchange Act of 1934.
Murchinson Ltd and Bistricer agreed to repay US$7,000,000 in gains that had been acquired through illegal practices (‘disgorgement’), along with a pre-judgement interest of US$1,078,183.
Murchinson agreed to pay a penalty of US$800,000, with Bistricer and Zogala paying penalties of US$75,000 and US$25,000 respectively.
Murchison and Bistricer also agreed to action that would ensure future compliance with Regulation SHO.
Speaking to SFT, a Murchinson spokesperson said: "We are pleased to have resolved this highly technical matter".
Having contacted SFT, the spokesperson was unwilling to provide further explanation of why this was a "highly technical matter", or why the company failed to prevent these regulatory violations.
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