The Securities and Exchange Commission said the case against G-2 Trading LLC would go to court. It had settled cases, however, with 22 other firms, including Blackthorn Investment Group, Claritas Investment Ltd., Credentia Group, D.E. Shaw & Co., Deerfield Management Company and Hudson Bay Capital Management.
The firms were charged with participating in short sales within five days of a public offering, then participating in the public offering. Such buying and selling -- the short sale being the culmination of a bet that the price of a stock will go down -- is banned as it is potentially a means of manipulating prices.
"The rule applies regardless of the trader's intent, and promotes offering prices that are set by natural forces of supply and demand rather than manipulative activity," the SEC said in a statement. The rule, called Rule 105, " therefore helps prevent short selling that can reduce offering proceeds received by companies by artificially depressing the market price shortly before the company prices its public offering," the agency said.
The SEC said it had settled the 22 cases with full disgorgement of profits, the highest being a $2,537,114 forfeiture by JGP Global Gestao de Recursos, and fines ranging from $65,000 to be paid by several firms to $679,950 to be paid by Manikay Partners.
"The benchmark of an effective enforcement program is zero tolerance for any securities law violations, including violations that do not require manipulative intent," said Andrew J. Ceresney, co-director of the SEC's Division of Enforcement.
"Through this new program of streamlined investigations and resolutions of Rule 105 violations, we are sending the clear message that firms must pay the price for violations while also conserving agency resources," Ceresney said.
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