On September 17, 2013, the Securities and Exchange Commission (SEC or “Commission”) announced settled enforcement actions against 23 firms for short selling in violation of Rule 105 of Regulation M, which limits the ability of firms, in the absence of an exception, from participating in firm commitment offerings after short selling those same stocks. Andrew J. Ceresney, Co-Director of the SEC’s Division of Enforcement, stated that their efforts will continue to focus on these violations: “Through this new program of streamlined investigations and resolutions of Rule 105 violations, we are sending the clear message that firms must pay the price for violations while also conserving agency resources.”
On the same day that the SEC announced these proceedings, the SEC’s National Examination Program (NEP), and the Office of Compliance Inspections and Examinations issued a National Exam Program Risk Alert (“Risk Alert”) directing investment advisers, investment companies and broker-dealers to review their compliance programs to promote compliance with Rule 105 of Regulation M. The Risk Alert reported that, in 40 settled actions finding Rule 105 violations since January 2010, the Commission has collected disgorgement, penalties and interest in excess of $42 million. The Risk Alert highlighted observations by SEC examiners about Rule 105 compliance issues and corrective actions that some firms have taken proactively to remedy Rule 105 concerns.
Please see full alert below for more information.
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