2024-09-25 SEC Press pdf 203 KB 25,790 chars

In re Adage Capital Management

Exhibit of SEC Levies More Than $3.8 Million in Penalties in Sweep of Late Beneficial Ownership and Insider Transaction Reports

Source PDF JSON

summary

paragraph

Adage Capital Management, L.P. failed to timely file required beneficial ownership reports under Sections 13(d) and 16(a) of the Exchange Act, resulting in 44 late reports and a non-compliant Schedule 13G filing. The violations involved late filings of Forms 3, 4, and 5, and an initial statement under Section 13(d) for beneficial ownership in GCM, delaying disclosures of over $25 million in transactions. Adage was ordered to cease and desist from future violations and pay a $200,000 civil money penalty to the Securities and Exchange Commission.

narrative

Adage Capital Management, L.P. was found in violation of Sections 13(d) and 16(a) of the Securities Exchange Act of 1934 for failing to timely report transactions involving GCM Grosvenor, Inc. and Advent Technologies Holdings, Inc. common stock. The violations involved late filings of Forms 3, 4, and 5, and an initial statement under Section 13(d) for beneficial ownership in GCM, delaying disclosures of over $25 million in transactions. Adage missed deadlines for Form 3 and Form 4 filings related to its >10% ownership in both companies, including over 50 late Form 4 reports for GCM transactions totaling more than $25 million in value. Adage also filed a Schedule 13G for GCM more than six months after the 10-day deadline. The SEC found Adage caused these violations through negligence, with no scienter required. As a result, Adage was ordered to cease and desist from future violations and pay a $200,000 civil money penalty to the Securities and Exchange Commission. Adage cooperated with the investigation and implemented remedial measures, leading to the acceptance of its settlement offer without admission of guilt.

Enriched metadata

Scheme: unclassified (30%)
Court: District of Columbia
Outcome: settled
Civil penalty: $200,000
Ticker: GCMG

Classified unclassified(confidence 30%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →

Extracted insights

Dollar amounts 2

$25.00M $25 million $10M–$100M
$200K $200,000 $100K–$1M

Entities 1

agency the securities and exchange commission

Triples 8

The Securities and Exchange Commission deems it appropriate that cease-and-desist proceedings be instituted
Respondent has submitted an Offer of Settlement
Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings
The Commission finds that these proceedings arise out of violations of the beneficial ownership reporting requirements of the federal securities laws
Section 13(d) of the Exchange Act requires any person who directly or indirectly acquires beneficial ownership of more than 5% of a registered class of equity security to file a statement with the Commission disclosing certain information and to file certain updating amendments
Section 16(a) of the Exchange Act requires officers and directors of a company with a registered class of equity security, and any beneficial owners of greater than 10% of such class, to file certain reports of securities holdings and transactions
Adage failed to file multiple required Section 16(a) reports of holdings and/or transactions in the securities of GCM Grosvenor, Inc. and Advent Technologies Holdings, Inc.
Adage failed to timely file an initial statement required under Section 13(d) with respect to beneficial owner

PDF

In re Adage Capital Management · Source

Text layers

Extracted body text (25,790c)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 101159 / September 25, 2024

ADMINISTRATIVE PROCEEDING
File No. 3-22175

In the Matter of

Adage Capital Management,
L.P.,

Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER

I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the
Securities Exchange Act of 1934 (“Exchange Act”), against Adage Capital Management, L.P.
(“Adage” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order
Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange
Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth
below.

III.
On the basis of this Order and Respondent’s Offer, the Commission finds
1
that:
Summary
1. These proceedings arise out of violations of the beneficial ownership reporting
requirements of the federal securities laws.
2. Section 13(d) of the Exchange Act and the rules promulgated thereunder require any
person who directly or indirectly acquires beneficial ownership of more than 5% of a registered
class of equity security to file a statement with the Commission disclosing certain information and
to file certain updating amendments. Section 13(d) is a key provision that allows shareholders
and potential investors to evaluate changes in substantial shareholdings. See 113 Cong. Rec. 855
(1967). The duty to file is not dependent on any intention by the stockholder to gain control of
the company, but on a mechanical 5% ownership test.
3. Section 16(a) of the Exchange Act and the rules promulgated thereunder require
officers and directors of a company with a registered class of equity security, and any beneficial
owners of greater than 10% of such class, to file certain reports of securities holdings and
transactions. Section 16(a) was motivated by a belief that “the most potent weapon against the
abuse of inside information is full and prompt publicity” and by a desire “to give investors an idea
of the purchases and sales by insiders which may in turn indicate their private opinion as to
prospects of the company.” H.R. Rep. 73-1383, at 13, 24 (1934). Reflecting this informational
purpose, the obligation to file applies irrespective of profits or the filer’s reasons for engaging in the
transactions. The Sarbanes-Oxley Act of 2002 and Commission implementing regulations
accelerated the reporting deadline for most transactions to two business days and mandated that all
reports be filed electronically on EDGAR to facilitate rapid dissemination to the public.
4. Adage failed to file on a timely basis multiple required Section 16(a) reports of
holdings and/or transactions in the securities of GCM Grosvenor, Inc. (“GCM”) and Advent
Technologies Holdings, Inc. (“Advent”) it executed on behalf of an affiliated private fund it
managed that held greater than 10% of GCM’s and Advent’s respective registered classes of
common stock. Adage also failed to timely file an initial statement required under Section 13(d)
with respect to beneficial ownership in GCM.
Respondent
5. Adage, a Delaware limited partnership headquartered in Boston, Massachusetts, has
been registered with the Commission as an investment adviser since 2012. Adage provides
investment management services to an affiliated private fund (the “Adage Fund”) and an affiliated

1
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on
any other person or entity in this or any other proceeding.

entity is the general partner of the fund. Adage had beneficial ownership of the securities held by
the Adage Fund under Section 13(d) of the Exchange Act and the rules thereunder. The Adage
Fund, the general partner of the fund, and Adage’s control persons (collectively, the “Adage
Affiliates”) also shared direct or indirect beneficial ownership of the relevant securities. Adage took
responsibility for making all beneficial ownership filings on behalf of Adage Affiliates.
Issuers
6. GCM is a Delaware corporation with its principal place of business in Illinois.
GCM’s Class A common stock is and has been at all relevant times registered with the Commission
under Section 12 of the Exchange Act and trades on the Nasdaq Stock Market (ticker: GCMG).
GCM registered its Class A common stock in connection with the completion of a business
combination transaction with CF Finance Acquisition Corp. on November 17, 2020. Adage and the
Adage Affiliates acquired beneficial ownership of more than 10% of GCM’s Class A common
stock on November 17, 2020. They continued to be greater than 10% beneficial owners until at
least May 10, 2023, and they remain greater than 5% beneficial owners.
7. Advent is a Delaware corporation with its principal place of business in
Massachusetts. Advent’s common stock is and has been at all relevant times registered with the
Commission under Section 12 of the Exchange Act and trades on the Nasdaq Stock Market (ticker:
ADN). Advent was formerly named AMCI Acquisition Corp., and its common stock traded with
the NASDAQ ticker AMCI until February 4, 2021. Adage and the Adage affiliates became greater
than 10% beneficial owners of Advent’s common stock as of May 15, 2020 and remained as such
until at least December 3, 2020.

Applicable Legal Framework
8. Section 13(d)(1) of the Exchange Act and Rule 13d-1(a) together require any person,
including a group, who has acquired beneficial ownership of more than 5% of a class of equity
security registered under Section 12 of the Exchange Act to publicly file a Schedule 13D disclosure
statement with the Commission, which includes, among other things, the identity of the beneficial
owner, the amount of beneficial ownership, and plans or proposals regarding the issuer. During the
time period herein, Rule 13d-1(a) required the Schedule 13D to be filed, within 10 days
2
after the
triggering acquisition.

2
On October 10, 2023, the Commission adopted amendments to the rules governing beneficial ownership
reporting under Sections 13(d) and 13(g) to update and shorten certain filing deadlines (the “2023 Amendments”).
Modernization of Beneficial Ownership Reporting, SEC Release No. 34-98704 (Oct. 10, 2023), 88 Fed. Reg. 76896
(Nov. 7, 2023). Among other provisions, the 2023 Amendments shortened the deadline for filing the initial
statement on Schedule 13D from 10 days to 5 business days. Id. at 76897, 76906. Compliance with this new
deadline is required as of February 5, 2024. See id. at 76942.

9. As an alternative to filing on Schedule 13D, certain statutory provisions and rules
allow the use of short-form disclosure statements on Schedule 13G with differing timing
requirements under certain conditions. During the time period herein, Rule 13d-1(c) provided that,
in lieu of filing a Schedule 13D, a person may file a short-form statement on Schedule 13G within
10 days
3
after the triggering acquisition if the person “has not acquired the securities with any
purpose, or with the effect of, changing or influencing the control of the issuer, or in connection
with or as a participant in any transaction having that purpose or effect,” and is not directly or
indirectly the beneficial owner of 20% or more of the class of securities (a “Passive Investor 13G
Filer”).
10. During the time period herein, a Passive Investor 13G Filer was required, under
Exchange Act Rule 13d-2(b), to file an annual amendment within 45 days after the end of each
calendar year if there were any changes in the information previously reported, unless certain
limited exceptions applied.
4
In addition, during the time period herein, a Passive Investor 13G Filer
was also required, under Exchange Act Rule 13d-2(d), to amend the Schedule 13G promptly upon
acquiring beneficial ownership of greater than 10% of a registered class of equity securities and m
to amend the Schedule 13G promptly thereafter upon increasing or decreasing its beneficial
ownership by more than 5% of the class.
5
Under the standard applicable during the time period
herein, any delay in filing such amendment beyond the date the filing reasonably can be made may
not be “prompt.”
6

11. Under Section 13(d) of the Exchange Act and the application of Rule 13d-3, a
beneficial owner of a security includes “any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise” has or shares voting or
investment power with respect to such security. More than one person may be a beneficial
owner of the same securities. Because a beneficial owner, under this standard, includes persons
who have both direct and indirect, as well as shared, voting and investment power, beneficial

3
The 2023 Amendments shortened this filing deadline to five business days. See id. at 76897, 76916.
Compliance with this new deadline is required by September 30, 2024. See id. at 76942.

4
The 2023 Amendments replaced this requirement with a requirement to file an amendment within 45 days
after the end of a calendar quarter in which a material change occurred to the information previously set forth. See
id. at 76898, 76921. Compliance with this new requirement is required beginning September 30, 2024. See id. at
76942.

5
The 2023 Amendments replaced “promptly” with a two-business day requirement. See id. at 76898,
76924. Compliance is required as of September 30, 2024. See id. at 76942.

6
Amendments to Beneficial Ownership Reporting Requirements, SEC Release No. 34-39538 (Jan. 12,
1998), 63 Fed. Reg. 2854, 2855 n.14 (Jan. 16, 1998).

ownership held by an entity is ordinarily also attributable to a control person of an entity and any
parent company in a control relationship with such entity.
7

12. Section 16(a) of the Exchange Act and the rules promulgated thereunder apply to
every person who is the beneficial owner of more than 10% of any class of any equity security
registered pursuant to Section 12 of the Exchange Act, and any officer or director of the issuer of
any such security (collectively, “insiders”). For purposes of determining status as a greater than
10% beneficial owner under Section 16(a), the term means any person who is deemed a beneficial
owner under Section 13(d) of the Exchange Act and the rules thereunder, subject to limited
exceptions.
8

13. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial
statements of holdings on Form 3 and keep this information current by reporting transactions on
Forms 4 and 5. Specifically, within 10 days after becoming an insider, or on or before the effective
date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report
disclosing all securities of the issuer in which the insider has or is deemed to have a direct or
indirect pecuniary interest. To keep this information current, insiders must file Form 4 reports
disclosing transactions resulting in a change in beneficial ownership within two business days
following the execution date of the transaction, except for limited types of transactions eligible for
deferred reporting. Transactions required to be reported on Form 4 include purchases and sales of
securities, exercises and conversions of derivative securities, and grants or awards of securities from
the issuer. In addition, insiders are required to file a Form 5 report within 45 days after the issuer’s
fiscal year-end to report any transactions or holdings that should have been, but were not, reported
on Form 3 or 4 (as applicable) during the issuer’s most recent fiscal year and any transactions
eligible for deferred reporting (unless the insider has previously reported all such transactions).

7
See id. at 2857. If the organizational structure of the parent and related entities are such that the voting and
investment powers over the subject securities are exercised independently, attribution may not be required for the
purposes of determining the aggregate amount owned by the controlling persons if certain conditions concerning
independence are met. Id.
8
A limited exception under Rule 16a-1(a)(1) applies to certain specified types of institutional investors, such
as registered investment advisers and broker-dealers, that permit such institutions to exclude any shares “held for the
benefit of third parties or in customer or fiduciary accounts in the ordinary course of business” if “such shares are
acquired ... without the purpose or effect of changing or influencing control of the issuer or engaging in any
arrangement subject to Rule 13d-3(b)” (a “Qualified Institution”). A parent holding company or control person of a
Qualified Institution may also exclude such shares if the aggregate amount held directly by the parent or control
person, and directly and indirectly by their subsidiaries and affiliates that are not Qualified Institutions, does not
exceed 1% of the class of securities. Rule 16a-1(a)(1)(vii).

14. There is no state of mind requirement for violations of Sections 16(a) and 13(d)
and the rules thereunder.
9
The failure to timely file a required report, even if inadvertent,
constitutes a violation.
10

Respondent Was a Cause of Violations of Section 16(a) by Its Affiliates
11

15. The Adage Fund held greater than 10% of Advent’s common stock as of May 15,
2020, resulting in the Adage Affiliates becoming subject to the reporting requirements of
Exchange Act Section 16(a). Adage failed to timely file an initial statement of beneficial
ownership on Form 3 on behalf of the Adage Affiliates with respect to Advent until November 30,
2020—more than six months after the filing deadline of May 26, 2020.
16. The Adage Fund also held greater than 10% of GCM’s Class A common stock as
of November 17, 2020, resulting in the Adage Affiliates becoming subject to the reporting
requirements of Exchange Act Section 16(a). Adage failed to file any Section 16(a) reports on
behalf of the Adage Affiliates with respect to GCM until July 2021—almost eight months after
the requirement to do so. On July 13, 2021, Adage filed an untimely initial statement of
beneficial ownership on Form 3 as well as untimely Forms 4 that reported transactions on
numerous dates between November 20, 2020 and June 21, 2021. These late reports include
transactions on the following dates that Adage executed on behalf of the Adage Fund on the
following dates that were required to be reported on Form 4 within two business days:

9
See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1167 (D.C. Cir. 1978) (“Indeed, the plain language of
section 13(d)(1) gives no hint that intentional conduct need be found, but rather, appears to place a simple and
affirmative duty of reporting on certain persons. The legislative history confirms that Congress was concerned with
providing disclosure to investors, and not merely with protecting them from fraudulent conduct”); SEC v. e-Smart
Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required to establish a violation of Section
16(a) of the Exchange Act). Negligence is sufficient to establish liability for causing such violations. See KPMG
Peat Marwick LLP, 74 SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (Commission opinion)
(“[N]egligence is sufficient to establish ‘causing’ liability under Exchange Act Section 21C(a) ... in cases in which a
person is alleged to ‘cause’ a primary violation that does not require scienter.”).
10
Cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL 26901, at *2 (May 19, 1980) (Commission opinion)
(“We have previously held that the failure to make a required report, even though inadvertent, constitutes a willful
violation”); see generally Herbert Moskowitz, 77 SEC Docket 446, 2002 WL 434524, at *7 (Mar. 21, 2002)
(Commission opinion) (“evidence of both motive for non-disclosure and actual market impact ... is irrelevant” to
whether violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder occurred); Mandated
Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809 (May 7, 2003), 68 Fed. Reg.
25788, 25792 (May 13, 2003) (noting that an issuer’s eligibility for temporary relief from disclosing Forms 4 filed one
business day late by its insiders “does not change the fact that any Form 3, 4 or 5 filed later than the applicable due date
violates Section 16(a)”) (emphasis added).
11
None of the Adage Affiliates were eligible at any time under Exchange Act Rule 16a-1(a)(1) subparagraphs
(i) through (xi) to exclude any securities over which they were deemed to have direct or indirect beneficial
ownership under Section 13(d) and the rules thereunder.

Form Type Date of Trans. Due Date Date Filed
4 11/20/2020 11/24/2020 7/13/2021
4 11/25/2020 11/30/2020 7/13/2021
4 11/30/2020 12/2/2020 7/13/2021
4 12/1/2020 12/3/2020 7/13/2021
4 12/8/2020 12/10/2020 7/13/2021
4 12/9/2020 12/11/2020 7/13/2021
4 12/10/2020 12/14/2020 7/13/2021
4 12/11/2020 12/15/2020 7/13/2021
4 12/14/2020 12/16/2020 7/13/2021
4 12/15/2020 12/17/2020 7/13/2021
4 12/16/2020 12/18/2020 7/13/2021
4 12/17/2020 12/21/2020 7/13/2021
4 12/22/2020 12/24/2020 7/13/2021
4 12/31/2020 1/5/2021 7/13/2021
4 1/4/2021 1/6/2021 7/13/2021
4 1/6/2021 1/8/2021 7/13/2021
4 1/7/2021 1/11/2021 7/13/2021
4 1/12/2021 1/14/2021 7/13/2021
4 1/14/2021 1/19/2021 7/13/2021
4 1/20/2021 1/22/2021 7/13/2021
4 1/22/2021 1/26/2021 7/13/2021
4 1/26/2021 1/28/2021 7/13/2021
4 1/27/2021 1/29/2021 7/13/2021
4 1/29/2021 2/2/2021 7/13/2021
4 2/2/2021 2/4/2021 7/13/2021
4 2/5/2021 2/9/2021 7/13/2021
4 2/8/2021 2/10/2021 7/13/2021
4 2/9/2021 2/11/2021 7/13/2021
4 2/10/2021 2/12/2021 7/13/2021

Form Type Date of Trans. Due Date Date Filed
4 2/11/2021 2/16/2021 7/13/2021
4 2/12/2021 2/17/2021 7/13/2021
4 2/17/2021 2/19/2021 7/13/2021
4 2/18/2021 2/22/2021 7/13/2021
4 2/22/2021 2/24/2021 7/13/2021
4 2/23/2021 2/25/2021 7/13/2021
4 2/24/2021 2/26/2021 7/13/2021
4 3/2/2021 3/4/2021 7/13/2021
4 3/8/2021 3/10/2021 7/13/2021
4 4/14/2021 4/16/2021 7/13/2021
4 4/15/2021 4/19/2021 7/13/2021
4 4/16/2021 4/20/2021 7/13/2021
4 4/19/2021 4/21/2021 7/13/2021
4 4/21/2021 4/23/2021 7/13/2021
4 4/22/2021 4/26/2021 7/13/2021
4 4/23/2021 4/27/2021 7/13/2021
4 4/26/2021 4/28/2021 7/13/2021
4 4/27/2021 4/29/2021 7/13/2021
4 4/28/2021 4/30/2021 7/13/2021
4 4/29/2021 5/3/2021 7/13/2021
4 4/30/2021 5/4/2021 7/13/2021
4 5/4/2021 5/6/2021 7/13/2021
4 5/5/2021 5/7/2021 7/13/2021
4 5/6/2021 5/10/2021 7/13/2021
4 5/7/2021 5/11/2021 7/13/2021
4 5/10/2021 5/12/2021 7/13/2021
4 5/12/2021 5/14/2021 7/13/2021
4 5/18/2021 5/20/2021 7/13/2021
4 5/19/2021 5/21/2021 7/13/2021

Form Type Date of Trans. Due Date Date Filed
4 5/20/2021 5/24/2021 7/13/2021
4 6/3/2021 6/7/2021 7/13/2021
4 6/4/2021 6/8/2021 7/13/2021
4 6/7/2021 6/9/2021 7/13/2021
4 6/8/2021 6/10/2021 7/13/2021
4 6/9/2021 6/11/2021 7/13/2021
4 6/10/2021 6/14/2021 7/13/2021
4 6/11/2021 6/15/2021 7/13/2021
4 6/14/2021 6/16/2021 7/13/2021
4 6/16/2021 6/21/2021 7/13/2021
4 6/18/2021 6/22/2021 7/13/2021
4 6/21/2021 6/23/2021 7/13/2021

17. These late-reported transactions in GCM primarily involved open-market sales of
GCM’s common stock together with a smaller number of open-market purchases. In the
aggregate, these transactions had a market value in excess of $25 million and constituted a net
disposition of the equivalent of approximately 2.3% of GCM’s outstanding Class A common
stock shares. Adage also failed to file a required Form 5 by February 14, 2021 on behalf of the
Adage Affiliates to report the holdings and transactions that should have been reported on Forms
3 and 4 during GCM’s fiscal year 2020 but were not.
18. As a result of the conduct described above, Respondent Adage was a cause of
violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by the Adage
Affiliates.
Respondent Failed to Timely File as Required under Section 13(d)
19. Adage and the Adage Affiliates have been subject to the reporting requirements of
Exchange Act Section 13(d) since acquiring beneficial ownership of more than 5% of GCM’s
Class A common stock as of November 17, 2020, and remain subject to those requirements.
Adage and the Adage Affiliates were required to file a Schedule 13D within 10 days, or in lieu
thereof, file a Schedule 13G within 10 days if eligible under Rule 13d-1(c) as Passive Investor
13G Filers. Adage’s filing of an initial Schedule 13G statement on behalf of itself and the Adage
Affiliates on July 13, 2021 did not comply with the applicable 10-day filing deadline.

20. As a result of the conduct described above, Adage violated Section 13(d) of the
Exchange Act and Rule 13d-1 thereunder, and was a cause of violations by the Adage Affiliates
of such provisions.
Respondent’s Remedial Efforts
21. In determining to accept Respondent’s Offer, the Commission considered certain
remedial acts undertaken by Respondent and cooperation afforded to Commission staff.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Adage cease and desist
from committing or causing any violations and any future violations of Sections 13(d) and 16(a) of
the Exchange Act and Rules 13d-1 and 16a-3 promulgated thereunder.
B. Respondent shall, within 14 days of the entry of this Order, pay a civil money
penalty in the amount of $200,000 to the Securities and Exchange Commission, for transfer to
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.
Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will
provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov through
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United States
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:

Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying
Adage Capital Management, L.P. as a Respondent in these proceedings, and the file number of
these proceedings; a copy of the cover letter and check or money order must be sent to Thomas

Smith, Associate Regional Director, Division of Enforcement, Securities and Exchange
Commission, 100 Pearl Street, Suite 20-100, New York, NY 10004.
Amounts ordered to be paid as civil money penalties pursuant to this Order shall be
treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any
award of compensatory damages by the amount of any part of Respondent’s payment of a civil
penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order
granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of
the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be
deemed an additional civil penalty and shall not be deemed to change the amount of the civil
penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action”
means a private damages action brought against Respondent by or on behalf of one or more
investors based on substantially the same facts as alleged in the Order instituted by the
Commission in this proceeding.

By the Commission.

Vanessa A. Countryman
Secretary

OCR text (26,178c · tika · 95% conf)

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 101159 / September 25, 2024

ADMINISTRATIVE PROCEEDING

File No. 3-22175

In the Matter of

Adage Capital Management,

L.P.,

Respondent.

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO

SECTION 21C OF THE SECURITIES

EXCHANGE ACT OF 1934, MAKING

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER

The Securities and Exchange Commission (“Commission”) deems it appropriate that

cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the

Securities Exchange Act of 1934 (“Exchange Act”), against Adage Capital Management, L.P.

(“Adage” or “Respondent”).

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the

purpose of these proceedings and any other proceedings brought by or on behalf of the

Commission, or to which the Commission is a party, and without admitting or denying the

findings herein, except as to the Commission’s jurisdiction over Respondent and the subject

matter of these proceedings, which are admitted, Respondent consents to the entry of this Order

Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange

Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth

below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1 that:

Summary

1. These proceedings arise out of violations of the beneficial ownership reporting

requirements of the federal securities laws.

2. Section 13(d) of the Exchange Act and the rules promulgated thereunder require any

person who directly or indirectly acquires beneficial ownership of more than 5% of a registered

class of equity security to file a statement with the Commission disclosing certain information and

to file certain updating amendments. Section 13(d) is a key provision that allows shareholders

and potential investors to evaluate changes in substantial shareholdings. See 113 Cong. Rec. 855

(1967). The duty to file is not dependent on any intention by the stockholder to gain control of

the company, but on a mechanical 5% ownership test.

3. Section 16(a) of the Exchange Act and the rules promulgated thereunder require

officers and directors of a company with a registered class of equity security, and any beneficial

owners of greater than 10% of such class, to file certain reports of securities holdings and

transactions. Section 16(a) was motivated by a belief that “the most potent weapon against the

abuse of inside information is full and prompt publicity” and by a desire “to give investors an idea

of the purchases and sales by insiders which may in turn indicate their private opinion as to

prospects of the company.” H.R. Rep. 73-1383, at 13, 24 (1934). Reflecting this informational

purpose, the obligation to file applies irrespective of profits or the filer’s reasons for engaging in the

transactions. The Sarbanes-Oxley Act of 2002 and Commission implementing regulations

accelerated the reporting deadline for most transactions to two business days and mandated that all

reports be filed electronically on EDGAR to facilitate rapid dissemination to the public.

4. Adage failed to file on a timely basis multiple required Section 16(a) reports of

holdings and/or transactions in the securities of GCM Grosvenor, Inc. (“GCM”) and Advent

Technologies Holdings, Inc. (“Advent”) it executed on behalf of an affiliated private fund it

managed that held greater than 10% of GCM’s and Advent’s respective registered classes of

common stock. Adage also failed to timely file an initial statement required under Section 13(d)

with respect to beneficial ownership in GCM.

Respondent

5. Adage, a Delaware limited partnership headquartered in Boston, Massachusetts, has

been registered with the Commission as an investment adviser since 2012. Adage provides

investment management services to an affiliated private fund (the “Adage Fund”) and an affiliated

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on

any other person or entity in this or any other proceeding.

entity is the general partner of the fund. Adage had beneficial ownership of the securities held by

the Adage Fund under Section 13(d) of the Exchange Act and the rules thereunder. The Adage

Fund, the general partner of the fund, and Adage’s control persons (collectively, the “Adage

Affiliates”) also shared direct or indirect beneficial ownership of the relevant securities. Adage took

responsibility for making all beneficial ownership filings on behalf of Adage Affiliates.

Issuers

6. GCM is a Delaware corporation with its principal place of business in Illinois.

GCM’s Class A common stock is and has been at all relevant times registered with the Commission

under Section 12 of the Exchange Act and trades on the Nasdaq Stock Market (ticker: GCMG).

GCM registered its Class A common stock in connection with the completion of a business

combination transaction with CF Finance Acquisition Corp. on November 17, 2020. Adage and the

Adage Affiliates acquired beneficial ownership of more than 10% of GCM’s Class A common

stock on November 17, 2020. They continued to be greater than 10% beneficial owners until at

least May 10, 2023, and they remain greater than 5% beneficial owners.

7. Advent is a Delaware corporation with its principal place of business in

Massachusetts. Advent’s common stock is and has been at all relevant times registered with the

Commission under Section 12 of the Exchange Act and trades on the Nasdaq Stock Market (ticker:

ADN). Advent was formerly named AMCI Acquisition Corp., and its common stock traded with

the NASDAQ ticker AMCI until February 4, 2021. Adage and the Adage affiliates became greater

than 10% beneficial owners of Advent’s common stock as of May 15, 2020 and remained as such

until at least December 3, 2020.

Applicable Legal Framework

8. Section 13(d)(1) of the Exchange Act and Rule 13d-1(a) together require any person,

including a group, who has acquired beneficial ownership of more than 5% of a class of equity

security registered under Section 12 of the Exchange Act to publicly file a Schedule 13D disclosure

statement with the Commission, which includes, among other things, the identity of the beneficial

owner, the amount of beneficial ownership, and plans or proposals regarding the issuer. During the

time period herein, Rule 13d-1(a) required the Schedule 13D to be filed, within 10 days2 after the

triggering acquisition.

2 On October 10, 2023, the Commission adopted amendments to the rules governing beneficial ownership

reporting under Sections 13(d) and 13(g) to update and shorten certain filing deadlines (the “2023 Amendments”).

Modernization of Beneficial Ownership Reporting, SEC Release No. 34-98704 (Oct. 10, 2023), 88 Fed. Reg. 76896

(Nov. 7, 2023). Among other provisions, the 2023 Amendments shortened the deadline for filing the initial

statement on Schedule 13D from 10 days to 5 business days. Id. at 76897, 76906. Compliance with this new

deadline is required as of February 5, 2024. See id. at 76942.

9. As an alternative to filing on Schedule 13D, certain statutory provisions and rules

allow the use of short-form disclosure statements on Schedule 13G with differing timing

requirements under certain conditions. During the time period herein, Rule 13d-1(c) provided that,

in lieu of filing a Schedule 13D, a person may file a short-form statement on Schedule 13G within

10 days3 after the triggering acquisition if the person “has not acquired the securities with any

purpose, or with the effect of, changing or influencing the control of the issuer, or in connection

with or as a participant in any transaction having that purpose or effect,” and is not directly or

indirectly the beneficial owner of 20% or more of the class of securities (a “Passive Investor 13G

Filer”).

10. During the time period herein, a Passive Investor 13G Filer was required, under

Exchange Act Rule 13d-2(b), to file an annual amendment within 45 days after the end of each

calendar year if there were any changes in the information previously reported, unless certain

limited exceptions applied.4 In addition, during the time period herein, a Passive Investor 13G Filer

was also required, under Exchange Act Rule 13d-2(d), to amend the Schedule 13G promptly upon

acquiring beneficial ownership of greater than 10% of a registered class of equity securities and m

to amend the Schedule 13G promptly thereafter upon increasing or decreasing its beneficial

ownership by more than 5% of the class.5 Under the standard applicable during the time period

herein, any delay in filing such amendment beyond the date the filing reasonably can be made may

not be “prompt.”6

11. Under Section 13(d) of the Exchange Act and the application of Rule 13d-3, a

beneficial owner of a security includes “any person who, directly or indirectly, through any

contract, arrangement, understanding, relationship or otherwise” has or shares voting or

investment power with respect to such security. More than one person may be a beneficial

owner of the same securities. Because a beneficial owner, under this standard, includes persons

who have both direct and indirect, as well as shared, voting and investment power, beneficial

3 The 2023 Amendments shortened this filing deadline to five business days. See id. at 76897, 76916.

Compliance with this new deadline is required by September 30, 2024. See id. at 76942.

4 The 2023 Amendments replaced this requirement with a requirement to file an amendment within 45 days

after the end of a calendar quarter in which a material change occurred to the information previously set forth. See

id. at 76898, 76921. Compliance with this new requirement is required beginning September 30, 2024. See id. at

76942.

5 The 2023 Amendments replaced “promptly” with a two-business day requirement. See id. at 76898,

76924. Compliance is required as of September 30, 2024. See id. at 76942.

6 Amendments to Beneficial Ownership Reporting Requirements, SEC Release No. 34-39538 (Jan. 12,

1998), 63 Fed. Reg. 2854, 2855 n.14 (Jan. 16, 1998).

ownership held by an entity is ordinarily also attributable to a control person of an entity and any

parent company in a control relationship with such entity.7

12. Section 16(a) of the Exchange Act and the rules promulgated thereunder apply to

every person who is the beneficial owner of more than 10% of any class of any equity security

registered pursuant to Section 12 of the Exchange Act, and any officer or director of the issuer of

any such security (collectively, “insiders”). For purposes of determining status as a greater than

10% beneficial owner under Section 16(a), the term means any person who is deemed a beneficial

owner under Section 13(d) of the Exchange Act and the rules thereunder, subject to limited

exceptions.8

13. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial

statements of holdings on Form 3 and keep this information current by reporting transactions on

Forms 4 and 5. Specifically, within 10 days after becoming an insider, or on or before the effective

date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report

disclosing all securities of the issuer in which the insider has or is deemed to have a direct or

indirect pecuniary interest. To keep this information current, insiders must file Form 4 reports

disclosing transactions resulting in a change in beneficial ownership within two business days

following the execution date of the transaction, except for limited types of transactions eligible for

deferred reporting. Transactions required to be reported on Form 4 include purchases and sales of

securities, exercises and conversions of derivative securities, and grants or awards of securities from

the issuer. In addition, insiders are required to file a Form 5 report within 45 days after the issuer’s

fiscal year-end to report any transactions or holdings that should have been, but were not, reported

on Form 3 or 4 (as applicable) during the issuer’s most recent fiscal year and any transactions

eligible for deferred reporting (unless the insider has previously reported all such transactions).

7 See id. at 2857. If the organizational structure of the parent and related entities are such that the voting and

investment powers over the subject securities are exercised independently, attribution may not be required for the

purposes of determining the aggregate amount owned by the controlling persons if certain conditions concerning

independence are met. Id.

8 A limited exception under Rule 16a-1(a)(1) applies to certain specified types of institutional investors, such

as registered investment advisers and broker-dealers, that permit such institutions to exclude any shares “held for the

benefit of third parties or in customer or fiduciary accounts in the ordinary course of business” if “such shares are

acquired … without the purpose or effect of changing or influencing control of the issuer or engaging in any

arrangement subject to Rule 13d-3(b)” (a “Qualified Institution”). A parent holding company or control person of a

Qualified Institution may also exclude such shares if the aggregate amount held directly by the parent or control

person, and directly and indirectly by their subsidiaries and affiliates that are not Qualified Institutions, does not

exceed 1% of the class of securities. Rule 16a-1(a)(1)(vii).

14. There is no state of mind requirement for violations of Sections 16(a) and 13(d)

and the rules thereunder.9 The failure to timely file a required report, even if inadvertent,

constitutes a violation.10

Respondent Was a Cause of Violations of Section 16(a) by Its Affiliates11

15. The Adage Fund held greater than 10% of Advent’s common stock as of May 15,

2020, resulting in the Adage Affiliates becoming subject to the reporting requirements of

Exchange Act Section 16(a). Adage failed to timely file an initial statement of beneficial

ownership on Form 3 on behalf of the Adage Affiliates with respect to Advent until November 30,

2020—more than six months after the filing deadline of May 26, 2020.

16. The Adage Fund also held greater than 10% of GCM’s Class A common stock as

of November 17, 2020, resulting in the Adage Affiliates becoming subject to the reporting

requirements of Exchange Act Section 16(a). Adage failed to file any Section 16(a) reports on

behalf of the Adage Affiliates with respect to GCM until July 2021—almost eight months after

the requirement to do so. On July 13, 2021, Adage filed an untimely initial statement of

beneficial ownership on Form 3 as well as untimely Forms 4 that reported transactions on

numerous dates between November 20, 2020 and June 21, 2021. These late reports include

transactions on the following dates that Adage executed on behalf of the Adage Fund on the

following dates that were required to be reported on Form 4 within two business days:

9 See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1167 (D.C. Cir. 1978) (“Indeed, the plain language of

section 13(d)(1) gives no hint that intentional conduct need be found, but rather, appears to place a simple and

affirmative duty of reporting on certain persons. The legislative history confirms that Congress was concerned with

providing disclosure to investors, and not merely with protecting them from fraudulent conduct”); SEC v. e-Smart

Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required to establish a violation of Section

16(a) of the Exchange Act). Negligence is sufficient to establish liability for causing such violations. See KPMG

Peat Marwick LLP, 74 SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (Commission opinion)

(“[N]egligence is sufficient to establish ‘causing’ liability under Exchange Act Section 21C(a) … in cases in which a

person is alleged to ‘cause’ a primary violation that does not require scienter.”).

10 Cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL 26901, at *2 (May 19, 1980) (Commission opinion)

(“We have previously held that the failure to make a required report, even though inadvertent, constitutes a willful

violation”); see generally Herbert Moskowitz, 77 SEC Docket 446, 2002 WL 434524, at *7 (Mar. 21, 2002)

(Commission opinion) (“evidence of both motive for non-disclosure and actual market impact … is irrelevant” to

whether violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder occurred); Mandated

Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809 (May 7, 2003), 68 Fed. Reg.

25788, 25792 (May 13, 2003) (noting that an issuer’s eligibility for temporary relief from disclosing Forms 4 filed one

business day late by its insiders “does not change the fact that any Form 3, 4 or 5 filed later than the applicable due date

violates Section 16(a)”) (emphasis added).

11 None of the Adage Affiliates were eligible at any time under Exchange Act Rule 16a-1(a)(1) subparagraphs

(i) through (xi) to exclude any securities over which they were deemed to have direct or indirect beneficial

ownership under Section 13(d) and the rules thereunder.

Form Type Date of Trans. Due Date Date Filed

4 11/20/2020 11/24/2020 7/13/2021

4 11/25/2020 11/30/2020 7/13/2021

4 11/30/2020 12/2/2020 7/13/2021

4 12/1/2020 12/3/2020 7/13/2021

4 12/8/2020 12/10/2020 7/13/2021

4 12/9/2020 12/11/2020 7/13/2021

4 12/10/2020 12/14/2020 7/13/2021

4 12/11/2020 12/15/2020 7/13/2021

4 12/14/2020 12/16/2020 7/13/2021

4 12/15/2020 12/17/2020 7/13/2021

4 12/16/2020 12/18/2020 7/13/2021

4 12/17/2020 12/21/2020 7/13/2021

4 12/22/2020 12/24/2020 7/13/2021

4 12/31/2020 1/5/2021 7/13/2021

4 1/4/2021 1/6/2021 7/13/2021

4 1/6/2021 1/8/2021 7/13/2021

4 1/7/2021 1/11/2021 7/13/2021

4 1/12/2021 1/14/2021 7/13/2021

4 1/14/2021 1/19/2021 7/13/2021

4 1/20/2021 1/22/2021 7/13/2021

4 1/22/2021 1/26/2021 7/13/2021

4 1/26/2021 1/28/2021 7/13/2021

4 1/27/2021 1/29/2021 7/13/2021

4 1/29/2021 2/2/2021 7/13/2021

4 2/2/2021 2/4/2021 7/13/2021

4 2/5/2021 2/9/2021 7/13/2021

4 2/8/2021 2/10/2021 7/13/2021

4 2/9/2021 2/11/2021 7/13/2021

4 2/10/2021 2/12/2021 7/13/2021

Form Type Date of Trans. Due Date Date Filed

4 2/11/2021 2/16/2021 7/13/2021

4 2/12/2021 2/17/2021 7/13/2021

4 2/17/2021 2/19/2021 7/13/2021

4 2/18/2021 2/22/2021 7/13/2021

4 2/22/2021 2/24/2021 7/13/2021

4 2/23/2021 2/25/2021 7/13/2021

4 2/24/2021 2/26/2021 7/13/2021

4 3/2/2021 3/4/2021 7/13/2021

4 3/8/2021 3/10/2021 7/13/2021

4 4/14/2021 4/16/2021 7/13/2021

4 4/15/2021 4/19/2021 7/13/2021

4 4/16/2021 4/20/2021 7/13/2021

4 4/19/2021 4/21/2021 7/13/2021

4 4/21/2021 4/23/2021 7/13/2021

4 4/22/2021 4/26/2021 7/13/2021

4 4/23/2021 4/27/2021 7/13/2021

4 4/26/2021 4/28/2021 7/13/2021

4 4/27/2021 4/29/2021 7/13/2021

4 4/28/2021 4/30/2021 7/13/2021

4 4/29/2021 5/3/2021 7/13/2021

4 4/30/2021 5/4/2021 7/13/2021

4 5/4/2021 5/6/2021 7/13/2021

4 5/5/2021 5/7/2021 7/13/2021

4 5/6/2021 5/10/2021 7/13/2021

4 5/7/2021 5/11/2021 7/13/2021

4 5/10/2021 5/12/2021 7/13/2021

4 5/12/2021 5/14/2021 7/13/2021

4 5/18/2021 5/20/2021 7/13/2021

4 5/19/2021 5/21/2021 7/13/2021

Form Type Date of Trans. Due Date Date Filed

4 5/20/2021 5/24/2021 7/13/2021

4 6/3/2021 6/7/2021 7/13/2021

4 6/4/2021 6/8/2021 7/13/2021

4 6/7/2021 6/9/2021 7/13/2021

4 6/8/2021 6/10/2021 7/13/2021

4 6/9/2021 6/11/2021 7/13/2021

4 6/10/2021 6/14/2021 7/13/2021

4 6/11/2021 6/15/2021 7/13/2021

4 6/14/2021 6/16/2021 7/13/2021

4 6/16/2021 6/21/2021 7/13/2021

4 6/18/2021 6/22/2021 7/13/2021

4 6/21/2021 6/23/2021 7/13/2021

17. These late-reported transactions in GCM primarily involved open-market sales of

GCM’s common stock together with a smaller number of open-market purchases. In the

aggregate, these transactions had a market value in excess of $25 million and constituted a net

disposition of the equivalent of approximately 2.3% of GCM’s outstanding Class A common

stock shares. Adage also failed to file a required Form 5 by February 14, 2021 on behalf of the

Adage Affiliates to report the holdings and transactions that should have been reported on Forms

3 and 4 during GCM’s fiscal year 2020 but were not.

18. As a result of the conduct described above, Respondent Adage was a cause of

violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by the Adage

Affiliates.

Respondent Failed to Timely File as Required under Section 13(d)

19. Adage and the Adage Affiliates have been subject to the reporting requirements of

Exchange Act Section 13(d) since acquiring beneficial ownership of more than 5% of GCM’s

Class A common stock as of November 17, 2020, and remain subject to those requirements.

Adage and the Adage Affiliates were required to file a Schedule 13D within 10 days, or in lieu

thereof, file a Schedule 13G within 10 days if eligible under Rule 13d-1(c) as Passive Investor

13G Filers. Adage’s filing of an initial Schedule 13G statement on behalf of itself and the Adage

Affiliates on July 13, 2021 did not comply with the applicable 10-day filing deadline.

20. As a result of the conduct described above, Adage violated Section 13(d) of the

Exchange Act and Rule 13d-1 thereunder, and was a cause of violations by the Adage Affiliates

of such provisions.

Respondent’s Remedial Efforts

21. In determining to accept Respondent’s Offer, the Commission considered certain

remedial acts undertaken by Respondent and cooperation afforded to Commission staff.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions

agreed to in Respondent’s Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent Adage cease and desist

from committing or causing any violations and any future violations of Sections 13(d) and 16(a) of

the Exchange Act and Rules 13d-1 and 16a-3 promulgated thereunder.

B. Respondent shall, within 14 days of the entry of this Order, pay a civil money

penalty in the amount of $200,000 to the Securities and Exchange Commission, for transfer to

the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.

Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, which will

provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov through

the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United States

postal money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to:

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying

Adage Capital Management, L.P. as a Respondent in these proceedings, and the file number of

these proceedings; a copy of the cover letter and check or money order must be sent to Thomas

Smith, Associate Regional Director, Division of Enforcement, Securities and Exchange

Commission, 100 Pearl Street, Suite 20-100, New York, NY 10004.

Amounts ordered to be paid as civil money penalties pursuant to this Order shall be

treated as penalties paid to the government for all purposes, including all tax purposes. To

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any

award of compensatory damages by the amount of any part of Respondent’s payment of a civil

penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such

a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order

granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of

the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be

deemed an additional civil penalty and shall not be deemed to change the amount of the civil

penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action”

means a private damages action brought against Respondent by or on behalf of one or more

investors based on substantially the same facts as alleged in the Order instituted by the

Commission in this proceeding.

By the Commission.

Vanessa A. Countryman

Secretary

Respondent