SEC Settles Regulation M Violation Charges with Six Firms
Commentary by Steven Lofchie
The SEC settled charges against six firms for short-selling violations in advance of stock offerings. The settlements are part of the SEC's ongoing enforcement initiative to impose penalties for violations of Rule 105 ("Short Selling in Connection with a Public Offering") of Regulation M ("Distributions").
The SEC investigations found that the six firms engaged in short selling particular stocks immediately before they bought shares from an underwriter participating in follow-on public offerings. Each firm agreed to settle the SEC's charges and pay a combined total of more than $2.5 million in disgorgement, interest and penalties.
Commentary
At this point, firms should be well aware that the SEC has strong procedures for tracking Regulation M violations and is aggressive in imposing fines.