Inadvertently Shorting Into A Deal As Gateway Crime - Dealbreaker

Inadvertently Shorting Into A Deal As Gateway Crime

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Mary Jo White was the top federal prosecutor in New York City during Bill Bratton’s first run as the Big Apple’s top cop, and she learned a few lessons from his “broken windows” theory: Clean a place up a little, and throw the fucking book at the street urchins who are messing things up with graffiti and public defecation and, well, window-breaking, and the city will become the safe, sterile, boring place its leaders have always wanted it to be, and the street urchins will fall in line.

So don’t tell her that she’s spending a little too much time and energy going after inadvertent violators of Rule 105 of Regulation M, which says you can’t short a stock and then buy it in a public offering. Because that’s just a start. Next thing you know, you’ll have tens of thousands of Bernie Madoffs and insider traders and “magnets for market cheaters” to deal with. You can thank her later.

Nineteen trading firms and one trader will pay $9 million to collectively settle civil charges alleging they participated in a stock offering after shorting the stock during a restricted period, U.S. regulators said Tuesday.

The Securities and Exchange Commission said the settlements mark the latest actions in an effort to crack down on hedge funds and private equity funds that violate a securities rule designed to prevent potential manipulation….

The SEC's decision to focus on this area may reflect the "broken windows" enforcement philosophy that SEC Chair Mary Jo White announced last year.

U.S. SEC imposes $9 million in sanctions for short-sale violations [Reuters]

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