SEC Files Administrative Actions Against Adviser, Broker-Dealer Relating to “Marking-the-Close” Transactions

SEC Release No. 34-64336

April 25, 2011

The SEC announced the filing of two administrative enforcement actions against an investment adviser, its president, and the broker-dealer it employed relating to transactions that sought to "mark the close" in certain illiquid securities. According to the release, the adviser repeatedly had its broker-dealer execute trades in order to inflate the prices of certain illiquid securities by placing buy orders at prices well above the most recent previous trade before closing. The SEC charged both the adviser and the broker-dealer with violating Exchange Act Rule 10b-5, and also charged the adviser with best execution and recordkeeping violations.

Cross References

SEC Release No. 34-64337 / IA-3190 / IC-29659 (action against adviser)

Exchange Act §§ 10(b), 15(b)(4)(E)

Exchange Act Rule 10b-5

Advisers Act §§ 206(1), 206(2), 206(4)

Advisers Act Rules 206(4)-7, 204-2(a)(7)