The SEC filed a complaint in the U.S. District Court in San Francisco alleging that Andrew Evans, a Canadian trader at his firm, Maritime Asset Management, illegally shorted U.S. stocks from December 2010 until May 2012. Evans will pay more than $1 million in settlement charges.
Evans allegedly sold a U.S. company’s stocks at a high market price with the knowledge that the company was planning a follow-on offering at a lower cost in the near future. Evans then purchased stocks at the lower price to cover his short sales. He made an illegal profit of $582,175 with no market risk that is typically involved in legal sales.
The complaint claims that Evans violated an anti-manipulation provision, Rule 105, of the federal securities laws. This provision forbids short selling an equity security during a restricted period for the purpose of buying the same security through the follow-on offering for a profit.
Jina Choi, Regional Director of the SEC, stated, “Rule 105 was specifically designed to prevent unfair and manipulative trading that erodes pricing integrity and the ability of issuers to effectively raise capital.”
The settlement requires the trader to pay disgorgement of $582,175, prejudgment interest of $63,424, and a penalty of $364,389 for a total of over $1 million, subject to court approval.
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