SEC charges New York investment advisor with short selling violations
19 September 2024 US
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The US Securities and Exchange Commission (SEC) has settled charges against Gates Capital Management, a New York investment advisor, for violating Rule 105 short selling restrictions.
The company violated the rule when it purchased stock in a public offering of securities for fund clients after shorting the same stock for fund clients, the SEC says.
The firm did not admit or deny the findings in the SEC’s order, and has agreed to cease and desist from committing or causing the violations.
Gates Capital will pay disgorgement of US$432,564, prejudgment interest of US$5,445, and a civil penalty of US$57,615.
Rule 105 of Regulation M under the Securities Exchange Act of 1934 prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the offering, absent an exception.
Rule 105 applies regardless of the trader’s intent and is designed to prevent potentially manipulative short selling before the pricing of covered secondary offerings.
The SEC’s order finds that Gates Capital violated Rule 105 by participating in a covered offering of securities in September 2023, after effecting short sales of the same security during the applicable restricted period.
The order also credits Gates Capital with promptly self-reporting the violation and undertaking remedial measures, which the SEC considered in determining the amount of the penalty and the calculation of prejudgment interest.
The company violated the rule when it purchased stock in a public offering of securities for fund clients after shorting the same stock for fund clients, the SEC says.
The firm did not admit or deny the findings in the SEC’s order, and has agreed to cease and desist from committing or causing the violations.
Gates Capital will pay disgorgement of US$432,564, prejudgment interest of US$5,445, and a civil penalty of US$57,615.
Rule 105 of Regulation M under the Securities Exchange Act of 1934 prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the offering, absent an exception.
Rule 105 applies regardless of the trader’s intent and is designed to prevent potentially manipulative short selling before the pricing of covered secondary offerings.
The SEC’s order finds that Gates Capital violated Rule 105 by participating in a covered offering of securities in September 2023, after effecting short sales of the same security during the applicable restricted period.
The order also credits Gates Capital with promptly self-reporting the violation and undertaking remedial measures, which the SEC considered in determining the amount of the penalty and the calculation of prejudgment interest.
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