September 28, 2023

Broker-Dealer Fined for Over-Tendering Shares

A broker-dealer settled charges with FINRA and NYSE Arca (see here and here) for over-tendering shares into partial tender offers.

In separate Letters of Acceptance, Waiver and Consent, FINRA and NYSE Arca stated that the broker-dealer over-tendered shares in 13 partial tender offers. The over-tendering resulted from the firm calculating its "net long" position from each of the firm's accounts separately, rather than aggregating the number for the firm as a whole. The agencies found that the firm's accounts that had a short position were not netted against accounts that had a long position (and did not reduce such long position, as required by Exchange Act Rule 14e-4 ("Prohibited transactions in connection with partial tender offers" a/k/a the "Short Tender Rule").

FINRA and NYSE found that the broker-dealer violated Rule 14e-4 and NYSE Arca Rule 11.18 ("Supervision"). FINRA also found that the broker-dealer violated its obligations under Rule 3110 ("Supervision") and Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). To settle the charges, the broker-dealer agreed to (i) a censure, (ii) pay a collective fine of $2.5 million and (iii) disgorge a total amount of $5,771,489.

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