D.E. Shaw & Co., the $30 billion hedge fund, was among 23 investment firms accused by the U.S. Securities and Exchange Commission of improperly buying shares of companies they had bet against days earlier.
The firms violated SEC Rule 105, which prohibits taking part in a public offering after selling the stock short during a restricted period prior to the pricing of the sale, the agency said today in a statement outlining its administrative cases. The actions are being settled by 22 of the 23 firms for a total of more than $14.4 million, the SEC said.
Rule 105 helps prevent short selling that can reduce the proceeds received by companies by depressing the market shortly before public offerings are priced. Firms that violate the rule typically reap illicit profits by buying the shares at an artificially low price, the SEC said.
“The benchmark of an effective enforcement program is zero tolerance for any securities law violations, including violations that do not require manipulative intent,” Andrew Ceresney, co-chief of SEC enforcement, said in the statement.
D.E. Shaw, based in New York, agreed to pay about $667,000 to resolve the claims without admitting or denying wrongdoing. The firm, which was accused of violating the rule in four different offerings from 2010 through 2012, didn’t immediately respond to an e-mail seeking comment.
Ontario Teachers’ Pension Plan Board, the Toronto-based manager of about C$129.5 billion ($126 billion), was also sanctioned, the SEC said. Ontario Teachers’ agreed to pay about $225,000 to resolve the claims.
“The SEC has recognized our prompt remedial action and cooperation,” Deborah Allan, a spokeswoman for the pension plan board, said in an e-mail statement. “We appreciate the quick resolution of this matter.”
Since January 2010, the SEC has settled more than 40 actions related to violations of Rule 105, generating about $42 million in sanctions, the agency said. The SEC’s Office of Compliance Inspections and Examinations, in a separate release today, said the number of enforcement actions as well as the results of exams were evidence that firms should improve compliance with the rule.
