July 2, 2014
Today, the SEC charged five traders with violating Rule 105 of Regulation M – short selling in connection with a public offering (Reg. M). The traders agreed to pay a collective fine of nearly $750,000.
Reg. M prohibits purchasing securities in follow-on and secondary offerings when the purchaser has effected short sales in the securities within a specified period, prior to the pricing of an offering – the restricted period. In this case, from 2009 – 2012, the traders repeatedly sold shares short during the restricted period and purchased offering shares of the same securities they shorted.