FINRA Sanctions Short Seller – Securities & Going Public Attorneys
Short sale conspiracy theorists will be pleased to learn that on March 25, 2015, The Financial Industry Regulatory Authority (FINRA) announced sanctions of $916,000 against Short Seller, First New York Securities L.L.C. for short selling ahead 14 public offerings of securities, of which it was participating, in violation of Rule 105 of Regulation M. First New York Securities was also sanction for related supervisory violations. FINRA ordered First New York to pay disgorgement of more than $516,000, plus interest, and fined the firm $400,000. Additionally, the firm is prohibited from participating in secondary or follow-on offerings for six months.
Rule 105 of Regulation M under the Securities Exchange Act of 1934 generally prohibits buying securities in secondary offerings when the purchaser sold short the security that is the subject of the offering during a specific restricted period – typically five business days – before the secondary offering is priced.
Thomas Gira, FINRA Executive Vice President, Market Regulation, said, “Rule 105 violations, particularly recidivist violations as is the case with First New York, will be aggressively pursued by FINRA.”
From September 2010 through April 2013, First New York engaged in short sales within the five business days prior to the pricing of 14 initial public offerings in those securities, and then purchased securities in those registered offerings. First New York purchased a total of more than 670,000 shares after having sold short 187,060 shares of the securities within the five business days leading up to the offerings.
This wasn’t the firm’s first enforcement action for improper short selling, FINRA previously sanctioned the firm in December 2008 for Regulation M Rule 105 violations and related supervisory failures.
In concluding this settlement, First New York neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at i[email protected] or visit www.securitieslawyer101.com.
This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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