WASHINGTON (CN) - A proprietary trading firm on Long Island and its owner agreed to pay a record $7.2 million to settle charges of short-selling violations, the SEC said.
The SEC's Rule 105 prohibits short selling of an equity security during a restricted period - generally five business days before a public offering - and the subsequent purchase of that same security through the offering, the SEC said in a statement Wednesday.
It said that Jeffery W. Lynn created his business Worldwide Capital to invest and trade his own money.
According to the SEC statement: "Lynn's principal investment strategy focused primarily on new shares of public issuers coming to market through secondary and follow-on public offerings. Through traders he engaged to trade on his behalf, Lynn sought allocations of additional shares soon to be publicly offered, usually at a discount to the market price of the company's already publicly trading shares. He and his traders would then sell those shares short in advance of the offerings. Lynn and Worldwide Capital improperly profited from the difference between the price paid to acquire the offered shares and the market price on the date of the offering."
Lynn and Worldwide agreed to disgorge $4.2 million, plus interest of $526,000, and pay a penalty of $2.5 million, the SEC said.
And they'll do it all without admitting or denying that they did anything wrong, as is customary with SEC enforcement actions.
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