SEC fines Anson Advisors for short selling violations
20 October 2023 US
Image: AdobeStock/qingwa
The Securities and Exchange Commission (SEC) has fined Toronto-based Anson Advisors for violating its rules relating to short selling of securities.
It ruled that Anson Advisors Inc (AAI) purchased equities for private fund clients through three public offerings, having previously engaged in short sales of the same stocks shortly beforehand.
This action violated SEC Rule 105 of Regulation M under the Securities Exchange Act of 1934 which prohibits short selling of an equity during a restricted period — typically five business days prior to a covered public offering — and then subsequent buying the same security in the public offer during the restricted period.
The US securities market regulator indicates that Rule 105 applies regardless of the trader’s intent and is in place to prevent manipulative short sales before the pricing of covered share offers.
In its statement, the SEC finds that AAI violated Rule 105 by participating in three follow-on offerings, in December 2019, June 2020, and April 2021, after it had engaged in short sales of the same securities during the restricted period. “AAI's violations stemmed from an incorrect understanding of how to comply with an exception to Rule 105,” it says.
The SEC indicates in its order that AAI has subsequently taken remedial action, including reviewing its Rule 105 policies and procedures.
AAI has agreed to cease and desist from committing or causing violations under Rule 105, without admitting or denying the conclusions of the SEC order. It will pay US$2,469,109.11 in disgorgement, prejudgment interest of US$261,285.20, and a civil penalty of US$600,000.
It ruled that Anson Advisors Inc (AAI) purchased equities for private fund clients through three public offerings, having previously engaged in short sales of the same stocks shortly beforehand.
This action violated SEC Rule 105 of Regulation M under the Securities Exchange Act of 1934 which prohibits short selling of an equity during a restricted period — typically five business days prior to a covered public offering — and then subsequent buying the same security in the public offer during the restricted period.
The US securities market regulator indicates that Rule 105 applies regardless of the trader’s intent and is in place to prevent manipulative short sales before the pricing of covered share offers.
In its statement, the SEC finds that AAI violated Rule 105 by participating in three follow-on offerings, in December 2019, June 2020, and April 2021, after it had engaged in short sales of the same securities during the restricted period. “AAI's violations stemmed from an incorrect understanding of how to comply with an exception to Rule 105,” it says.
The SEC indicates in its order that AAI has subsequently taken remedial action, including reviewing its Rule 105 policies and procedures.
AAI has agreed to cease and desist from committing or causing violations under Rule 105, without admitting or denying the conclusions of the SEC order. It will pay US$2,469,109.11 in disgorgement, prejudgment interest of US$261,285.20, and a civil penalty of US$600,000.
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