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SEC fines Ontario Teachers' for shorting violations
2013-09-17 15:03 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
The U.S. Securities and Exchange Commission has fined the Ontario Teachers' Pension Plan Board and 22 other organizations for short-selling violations. The SEC claims that the firms sold a number of companies short just before receiving shares in those same companies through offerings. The fines levied by the SEC total $14.4-million, with the Ontario Teachers' agreeing to pay $224,835. (All figures are in U.S. dollars.)
The sanctions, announced by the SEC on Tuesday, Sept. 17, stem from violations of rules designed to prevent manipulation of a stock ahead a public offering. Generally, the SEC prohibits traders from participating in an offering if they have sold the same stock short within the preceding five days. Such short-selling can reduce the price of the offering, generating profits for the short-seller.
The specific allegations against the Ontario Teachers' are contained in an administrative order the SEC entered against the board on Sept. 16, 2013. The order describes the Ontario Teachers' as Canada's largest single-profession pension plan, with $129.5-billion (Canadian) in assets as of Dec. 31, 2012. It pays pensions for about 300,000 working and retired teachers in Ontario.
The SEC claims that the board sold short four companies in 2010 and 2011, and shortly afterward participated in public offerings. The first instance the SEC cites occurred on July 12, 2010, when the Ontario Teachers' shorted a company called BioMimetic Therapeutics Inc. at $10.03. Two days later, the company announced an offering at $8.50. The Ontario Teachers' received 25,000 shares in that offering, according to the SEC, generating profits of $38,250. Similar events occurred with three other companies: Pebblebrook Hotel Trust, BlackRock Inc. and SS&C Technologies Holdings, the SEC says. The board's total gains from the shorting were $144,898, according to the order.
To settle the case, the Ontario Teachers' agreed to disgorge those gains and to pay fines and interest that bring its total penalty to $224,835. In settling the case, the board did not admit to any wrongdoing.
Of the other penalties handed down Tuesday, one of the largest went to New York trader Manikay Partners, which agreed to pay $2.55-million. The SEC claims that Manikay, on behalf of a client, sold short two million shares of Citigroup Inc. on Dec. 16, 2009, at $3.49. Later that same day, Manikay received 30 million Citigroup shares at $3.15 in an offering, generating $1,657,000 in profits, the SEC says. Manikay did not contest the allegations, and agreed to pay the fine without admitting any wrongdoing.
The other firms fined Tuesday are: Blackthorn Investment Group, Claritas Investments Ltd., Credentia Group, D.E. Shaw & Co., Deerfield Management Company, Hudson Bay Capital Management, JGP Global Gestao de Recursos, M.S. Junior, Meru Capital Group, Merus Capital Partners, Pan Capital AB, PEAK6 Capital Management, Philadelphia Financial Management of San Francisco, Polo Capital Management, Soundpost Partners, Southpoint Capital Advisors, Talkot Capital, Vollero Beach Capital Partners, War Chest Capital Partners and Western Standard. None admitted any wrongdoing in accepting the fines. |