The Securities and Exchange Commission (SEC) today announced settled charges against Austin, Texas-based Kershner Trading Americas, LLC, a proprietary trading firm, for violating an SEC trading rule when it purchased stock in 23 public offerings after selling short the same stock, during a time period when the SEC rule prohibited those purchases.
The SEC’s order finds that Kershner violated Rule 105 of Regulation M under the Securities Exchange Act of 1934 (“Rule 105”), which prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the offering, absent an exception.
The rule applies regardless of the trader’s intent and is designed to prevent potentially manipulative short selling before the pricing of covered offerings.
The SEC’s order finds that Kershner violated Rule 105 by participating in 23 follow-on offerings occurring between February 2019 and June 2022 after it had engaged in short sales of the same securities during the restricted period.
According to the SEC’s order, after learning of the Commission’s investigation, Kershner prohibited its traders from further purchasing equity securities in covered offerings.
If Kershner wishes to purchase equity securities in any covered offering in the future, Kershner agrees to undertake certain actions, including adopting, implementing, and maintaining written compliance policies and procedures reasonably designed to prevent violations of Rule 105.
Without admitting or denying the findings in the SEC’s order, Kershner agreed to cease and desist from committing or causing violations of Rule 105, and to pay disgorgement of $593,375.76, prejudgment interest of $94,268.84, and a civil penalty of $812,355.40.
