Friday, November 29, 2013


The Securities and Exchange Commission (SEC) has a task force that is sweeping the market for Rule 105 Regulation M (Rule 105) violations. Rule 105 makes it unlawful for a person to purchase equity securities from an underwriter, broker, or dealer participating in a public offering if that person sold short the security that is the subject of the offering during the restricted period defined in the rule, absent an exception. Rule 105 defines the restricted period as the shorter of the period: (1) beginning five business days prior to the pricing of the offered securities and ending with such pricing; or (2) beginning with the initial filing of such registration statement or notification on Form 1-A or Form 1-E and ending with the pricing. The SEC adopted Rule 105 to prevent potentially manipulative activity. Also, Rule 105 is a prophylactic. Therefore, its provisions apply regardless of the short seller's intent.

The latest victim to be sanctioned in the SEC sweep is Chicago, Illinois based UBS O'Connor, LLC. UBS O'Connor allegedly violated Rule 105 sixteen times between January 2009 and March 2011 in connection with short sales it executed within the Rule 105 restricted period and subsequent purchase of the securities in firm commitment public offerings. UBS O'Connor consented to the entry of the Order in anticipation of the institution of proceedings by submitting an Offer of Settlement, which the Commission has determined to accept. UBS O'Connor was ordered to cease-and-desist, pay disgorgement in the amount of $3,787,590, prejudgment interest totaling $369,766, and a civil penalty of $1,140,000 to the United States Treasury.

Robert Wayne Pearce, a former SEC Enforcement Attorney, has litigated SEC actions for over 33 years, including, but not limited to, Regulation M, section 16(b) short-swing profits, insider trading, stock market manipulation, and other alleged violations of the Federal securities laws. If you have been contacted by the SEC and believe that you may be subject to an investigation involving a Rule 105 Regulation M violation or any other SEC rule, call Mr. Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce defends companies and individuals who may be the subject of an SEC investigation or enforcement action regarding their alleged involvement in securities laws violations.

This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 33 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to representing investors and financial industry professionals throughout the United States and internationally! Please visit our website, post a comment, call (800) 732-2889, or email Mr. Pearce at for answers to any of your questions about this blog post and/or any related matter.

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