In re WAR CHEST CAPITAL

 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 76140 / October 14, 2015 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 4227 / October 14, 2015 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-16894 
 
 
 
In the Matter of 
 
WAR CHEST CAPITAL 
PARTNERS LLC  
 
Respondent. 
 
 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934 
AND SECTION 203(e) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER 
   
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and 
Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”), against War Chest 
Capital Partners LLC (“War Chest” 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, prior to a hearing pursuant to the 
Commission’s Rules of Practice, 17 C.F.R. § 201.100 et seq., and without admitting or denying the 
findings  herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings, Pursuant to Section 21C of the Securities 
Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, Making 

 2 
Findings, and Imposing Remedial Sanctions and 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 Rule 105 of Regulation M of the 
Exchange Act by War Chest, a New York-based private equity firm.  Rule 105 prohibits selling 
short an equity security that is the subject of certain public offerings and purchasing the offered 
security from an underwriter or broker or dealer participating in the offering, if such short sale was 
effected during the restricted period as defined therein. 
 
2. On seven occasions, from January 2011 through September 2011, War Chest 
bought offering shares from an underwriter or broker or dealer participating in a follow-on public 
offering after having sold short the same security during the restricted period.  These violations 
collectively resulted in profits of $179,516.  
 
Respondent 
 
3.  War Chest Capital Partners LLC is a Delaware limited liability company which, 
at all relevant times, had its principal place of business in New York, New York.  During the 
period of violation, the company provided advisory services to one domestic fund with total 
assets under management of approximately $8,000,000.  At no time was it a registered 
investment adviser.  On September 16, 2013, a prior settled Commission order was instituted, 
finding that War Chest violated Rule 105 in connection with seven offerings.
 2
 
 
Legal Framework 
 
4. Rule 105 makes it unlawful for a person to purchase equity securities in certain 
public offerings from an underwriter, broker, or dealer participating in the 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.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public 
Offering, Rel. No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The 
Rule 105 restricted period is the shorter of the period:  (1) beginning five business days before the 
pricing of the offered securities and ending with such pricing; or (2) beginning with the initial 
filing of a registration statement or notification on Form 1-A or Form 1-E and ending with the 
pricing.  17 C.F.R. § 242.105(a)(1) and (a)(2).     
 
                                                 
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.  
 
2
  War Chest Capital Partners LLC, Exchange Act Release No. 70411 (September 16, 2013).   

 3 
5. The Commission adopted Rule 105 “to foster secondary and follow-on offering 
prices that are determined by independent market dynamics and not by potentially manipulative 
activity.”  72 Fed. Reg. 45094.  Rule 105 is prophylactic and prohibits the conduct irrespective of 
the short seller’s intent in effecting the short sale.  Id. 
 
War Chest’s Violations of Rule 105 of Regulation M 
 
6.  On January 13, 2011, War Chest sold short 13,100 shares of American Capital 
Agency Corp. (“AGNC”) during the restricted period at an average price of $28.7879 per share.  
On January 13, 2011, after the market close, AGNC priced a follow-on offering of its common 
stock at $28 per share.  War Chest received an allocation of 53,900 shares in that offering.  The 
difference between War Chest’s proceeds received from the restricted period short sales of AGNC 
shares and the price paid for 13,100 shares received in the offering was $10,321.49.  Respondent 
also improperly received a benefit of $31,611.84 by purchasing the remaining 40,800 shares at a 
discount from AGNC’s market price.  Thus, War Chest’s participation in the 2011 AGNC offering 
resulted in total profits of $41,933.33.   
 
7. On March 28, 2011, War Chest sold short 33,000 shares of Energy Transfer 
Partners, LP (“ETP”) during the restricted period at an average price of $50.6689 per share.  On 
March 29, 2011, ETP priced a follow-on offering of its common stock at $50.52 per share.  War 
Chest received an allocation of 63,020 shares in that offering.  The difference between War Chest’s 
proceeds received from the restricted period short sales of ETP shares and the price paid for 33,000 
shares received in the offering was $4,913.70.  Respondent also improperly received a benefit of 
$4,704.13 by purchasing the remaining 30,020 shares at a discount from ETP’s market price.  
Thus, War Chest’s participation in the 2011 ETP offering resulted in total profits of $9,617.83.    
 
8. On May 24, 2011, War Chest sold short 48,500 shares of American International 
Group, Inc. (“AIG”) during the restricted period at an average price of $29.4593 per share.  On 
May 24, 2012, after the market close, AIG priced a follow-on offering of its common stock at $29 
per share.  War Chest received an allocation of 134,375 shares in that offering.  The difference 
between War Chest’s proceeds received from the restricted period short sales of AIG shares and 
the price paid for 48,500 shares received in the offering was $22,276.05.  Thus, War Chest’s 
participation in the 2011 AIG offering resulted in total profits of $22,276.05. 
  
9.  On June 2, 2011, War Chest sold short a total of 237,250 shares of Arch Coal Inc. 
(“ACI”) during the restricted period at an average price of $27.4716 per share.  On June 3, 2011, 
ACI priced a follow-on offering of its common stock at $27 per share.  War Chest received an 
allocation of 231,600 shares in that offering.  Thus, War Chest’s participation in the 2011 ACI 
offering resulted in total profits of $109,222.56. 
  
 10. On June 15, 2011, War Chest sold short a total of 13,500 shares of Five Star 
Quality Care Inc. (“FVE”) during the restricted period at an average price of $5.3508.  On June 15, 
2011, after the market close, FVE priced a follow-on offering of its common stock at $5 per share.  
War Chest received an allocation of 55,400 shares in that offering.  The difference between War 
Chest’s proceeds received from the restricted period short sales of FVE shares and the price paid 

 4 
for 13,500 shares received in the offering was $4,735.80.  Respondent also improperly received a 
benefit of $2,710.93 by purchasing the remaining 41,900 shares at a discount from FVE’s market 
price.  Thus, War Chest’s participation in the 2011 FVE offering resulted in total profits of 
$7,446.73. 
 
 11. On June 23, 2011, War Chest sold short a total of 16,500 shares of the Excel Trust, 
Inc. (“EXL”) during the restricted period at an average price of $10.9391 per share.  On June 23, 
2011, after the market close, EXL priced a follow-on offering of its common stock at $10.94 per 
share.  War Chest received an allocation of 16,000 shares in that offering.   
 
 12. On September 8, 2011, War Chest sold short a total of 4,500 shares of Calumet 
Specialty Products Partners, LP (“CLMT”) during the restricted period at an average price of 
$18.1073 per share.  On September 8, 2011, after the market close, CLMT priced a follow-on 
offering of its common stock at $18 per share.  War Chest received an allocation of 22,550 shares 
in that offering.  The difference between War Chest’s proceeds received from the restricted period 
short sales of CLMT shares and the price paid for 4,500 shares received in the offering was 
$483.05.  Thus, War Chest’s participation in the 2011 CLMT offering resulted in total profits of 
$483.05. 
 
 13. War Chest’s violations of Rule 105 resulted in illicit profits to War Chest of 
$179,516.  
  
Violations   
 
 14. As a result of the conduct described above, War Chest willfully
3
 
 
violated Rule 105 
of Regulation M under the Exchange Act. 
Undertakings 
 
 War Chest has undertaken to: 
 
15. Limit its activities, functions, and operations as an investment adviser for one year, 
commencing the second Monday following the entry of this Order, by refraining from participating 
directly or indirectly in any secondary or follow-on offering.   
16. Certify, in writing, compliance with the undertaking set forth above.  The 
certification shall identify the undertaking, provide written evidence of compliance in the form of a 
narrative, and be supported by exhibits sufficient to demonstrate compliance.  The 
Commission staff may make reasonable requests for further evidence of compliance, and 
Respondent agrees to provide such evidence.  The certification and supporting material shall be 
                                                 
3
  A willful violation of the securities laws means merely “‘that the person charged with the duty knows what he is 
doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. 
Cir. 1949)). There is no requirement that the actor “‘also be aware that he is violating one of the Rules or Acts.’” Id. 
(quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 

 5 
submitted to Anita B. Bandy, with a copy to the Office of Chief Counsel of the Enforcement 
Division, no later than sixty (60) days from the date of the completion of the undertaking.   
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent War Chest’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act and Section 203(e) of the Advisers 
Act, Respondent War Chest shall cease and desist from committing or causing any violations and 
any future violations of Rule 105 of Regulation M of the Exchange Act;   
 
B. Respondent is censured; 
  
 C. Respondent shall pay disgorgement of $179,516, prejudgment interest of 
$22,302.02 and a civil penalty of $150,000 (for a total of $351,818.02), 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).   
 
Payment shall be made in the following installments: 
 
1. $51,818.02 within 30 days of entry of this Order; 
2. $30,000 within 60 days of entry of this Order; 
3. $30,000 within 90 days of entry of this Order; 
4. $30,000 within 120 days of entry of this Order; 
5. $30,000 within 150 days of entry of this Order; 
6. $30,000 within 180 days of entry of this Order; 
7. $30,000 within 210 days of entry of this Order; 
8. $30,000 within 240 days of entry of this Order; 
9. $30,000 within 270 days of entry of this Order; 
10. $30,000 within 300 days of entry of this Order; and 
11. $30,000, plus post-judgment interest on the payments described in Section IV.C.1-11 
pursuant to SEC Rule of Practice 600, within 330 days of entry of this Order. 
  
If any payment is not made by the date the payment is required by this Order, the entire 
outstanding balance of disgorgement, prejudgment interest, and civil penalties, plus any additional 
interest accrued pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. § 3717, shall be due 
and payable immediately, without further application.   
 
Payments must be made in one of the following ways: 
 

 6 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;
4
 
 
(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 War 
Chest  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 Gerald W. Hodgkins, Associate Director, 
Division of Enforcement, Securities  and Exchange Commission, 100 F Street, N.E., Washington, 
DC  20549. 
 
 D. 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. 
  
                                                 
4
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to options (2) or (3) above. 

 7 
 
 E. Respondent shall comply with the undertakings enumerated in Paragraphs 15 and 16 
above. 
 
 
  
 By the Commission. 
 
 
 
       Brent J. Fields 
       Secretary 
 
 
 
   
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 
 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 76140 / October 14, 2015 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 4227 / October 14, 2015 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-16894 

 

 

 

In the Matter of 

 

WAR CHEST CAPITAL 

PARTNERS LLC  

 

Respondent. 

 

 

 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934 

AND SECTION 203(e) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER 

   

 

I. 
 

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

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and 

Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”), against War Chest 

Capital Partners LLC (“War Chest” 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, prior to a hearing pursuant to the 

Commission’s Rules of Practice, 17 C.F.R. § 201.100 et seq., and without admitting or denying the 

findings  herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

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

Administrative and Cease-and-Desist Proceedings, Pursuant to Section 21C of the Securities 

Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, Making 



 2 

Findings, and Imposing Remedial Sanctions and 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 Rule 105 of Regulation M of the 

Exchange Act by War Chest, a New York-based private equity firm.  Rule 105 prohibits selling 

short an equity security that is the subject of certain public offerings and purchasing the offered 

security from an underwriter or broker or dealer participating in the offering, if such short sale was 

effected during the restricted period as defined therein. 

 

2. On seven occasions, from January 2011 through September 2011, War Chest 

bought offering shares from an underwriter or broker or dealer participating in a follow-on public 

offering after having sold short the same security during the restricted period.  These violations 

collectively resulted in profits of $179,516.  

 

Respondent 

 

3.  War Chest Capital Partners LLC is a Delaware limited liability company which, 

at all relevant times, had its principal place of business in New York, New York.  During the 

period of violation, the company provided advisory services to one domestic fund with total 

assets under management of approximately $8,000,000.  At no time was it a registered 

investment adviser.  On September 16, 2013, a prior settled Commission order was instituted, 

finding that War Chest violated Rule 105 in connection with seven offerings. 2 
 

Legal Framework 

 

4. Rule 105 makes it unlawful for a person to purchase equity securities in certain 

public offerings from an underwriter, broker, or dealer participating in the 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.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public 

Offering, Rel. No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The 

Rule 105 restricted period is the shorter of the period:  (1) beginning five business days before the 

pricing of the offered securities and ending with such pricing; or (2) beginning with the initial 

filing of a registration statement or notification on Form 1-A or Form 1-E and ending with the 

pricing.  17 C.F.R. § 242.105(a)(1) and (a)(2).     

 

                                                 
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.  

 
2  War Chest Capital Partners LLC, Exchange Act Release No. 70411 (September 16, 2013).   



 3 

5. The Commission adopted Rule 105 “to foster secondary and follow-on offering 

prices that are determined by independent market dynamics and not by potentially manipulative 

activity.”  72 Fed. Reg. 45094.  Rule 105 is prophylactic and prohibits the conduct irrespective of 

the short seller’s intent in effecting the short sale.  Id. 

 

War Chest’s Violations of Rule 105 of Regulation M 

 

6.  On January 13, 2011, War Chest sold short 13,100 shares of American Capital 

Agency Corp. (“AGNC”) during the restricted period at an average price of $28.7879 per share.  

On January 13, 2011, after the market close, AGNC priced a follow-on offering of its common 

stock at $28 per share.  War Chest received an allocation of 53,900 shares in that offering.  The 

difference between War Chest’s proceeds received from the restricted period short sales of AGNC 

shares and the price paid for 13,100 shares received in the offering was $10,321.49.  Respondent 

also improperly received a benefit of $31,611.84 by purchasing the remaining 40,800 shares at a 

discount from AGNC’s market price.  Thus, War Chest’s participation in the 2011 AGNC offering 

resulted in total profits of $41,933.33.   

 

7. On March 28, 2011, War Chest sold short 33,000 shares of Energy Transfer 

Partners, LP (“ETP”) during the restricted period at an average price of $50.6689 per share.  On 

March 29, 2011, ETP priced a follow-on offering of its common stock at $50.52 per share.  War 

Chest received an allocation of 63,020 shares in that offering.  The difference between War Chest’s 

proceeds received from the restricted period short sales of ETP shares and the price paid for 33,000 

shares received in the offering was $4,913.70.  Respondent also improperly received a benefit of 

$4,704.13 by purchasing the remaining 30,020 shares at a discount from ETP’s market price.  

Thus, War Chest’s participation in the 2011 ETP offering resulted in total profits of $9,617.83.    

 

8. On May 24, 2011, War Chest sold short 48,500 shares of American International 

Group, Inc. (“AIG”) during the restricted period at an average price of $29.4593 per share.  On 

May 24, 2012, after the market close, AIG priced a follow-on offering of its common stock at $29 

per share.  War Chest received an allocation of 134,375 shares in that offering.  The difference 

between War Chest’s proceeds received from the restricted period short sales of AIG shares and 

the price paid for 48,500 shares received in the offering was $22,276.05.  Thus, War Chest’s 

participation in the 2011 AIG offering resulted in total profits of $22,276.05. 

  

9.  On June 2, 2011, War Chest sold short a total of 237,250 shares of Arch Coal Inc. 

(“ACI”) during the restricted period at an average price of $27.4716 per share.  On June 3, 2011, 

ACI priced a follow-on offering of its common stock at $27 per share.  War Chest received an 

allocation of 231,600 shares in that offering.  Thus, War Chest’s participation in the 2011 ACI 

offering resulted in total profits of $109,222.56. 

  

 10. On June 15, 2011, War Chest sold short a total of 13,500 shares of Five Star 

Quality Care Inc. (“FVE”) during the restricted period at an average price of $5.3508.  On June 15, 

2011, after the market close, FVE priced a follow-on offering of its common stock at $5 per share.  

War Chest received an allocation of 55,400 shares in that offering.  The difference between War 

Chest’s proceeds received from the restricted period short sales of FVE shares and the price paid 



 4 

for 13,500 shares received in the offering was $4,735.80.  Respondent also improperly received a 

benefit of $2,710.93 by purchasing the remaining 41,900 shares at a discount from FVE’s market 

price.  Thus, War Chest’s participation in the 2011 FVE offering resulted in total profits of 

$7,446.73. 

 

 11. On June 23, 2011, War Chest sold short a total of 16,500 shares of the Excel Trust, 

Inc. (“EXL”) during the restricted period at an average price of $10.9391 per share.  On June 23, 

2011, after the market close, EXL priced a follow-on offering of its common stock at $10.94 per 

share.  War Chest received an allocation of 16,000 shares in that offering.   

 

 12. On September 8, 2011, War Chest sold short a total of 4,500 shares of Calumet 

Specialty Products Partners, LP (“CLMT”) during the restricted period at an average price of 

$18.1073 per share.  On September 8, 2011, after the market close, CLMT priced a follow-on 

offering of its common stock at $18 per share.  War Chest received an allocation of 22,550 shares 

in that offering.  The difference between War Chest’s proceeds received from the restricted period 

short sales of CLMT shares and the price paid for 4,500 shares received in the offering was 

$483.05.  Thus, War Chest’s participation in the 2011 CLMT offering resulted in total profits of 

$483.05. 

 

 13. War Chest’s violations of Rule 105 resulted in illicit profits to War Chest of 

$179,516.  

  

Violations   

 

 14. As a result of the conduct described above, War Chest willfully3 
 

violated Rule 105 

of Regulation M under the Exchange Act. 

Undertakings 
 

 War Chest has undertaken to: 

 

15. Limit its activities, functions, and operations as an investment adviser for one year, 

commencing the second Monday following the entry of this Order, by refraining from participating 

directly or indirectly in any secondary or follow-on offering.   

16. Certify, in writing, compliance with the undertaking set forth above.  The 

certification shall identify the undertaking, provide written evidence of compliance in the form of a 

narrative, and be supported by exhibits sufficient to demonstrate compliance.  The 

Commission staff may make reasonable requests for further evidence of compliance, and 

Respondent agrees to provide such evidence.  The certification and supporting material shall be 

                                                 

3  A willful violation of the securities laws means merely “‘that the person charged with the duty knows what he is 

doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. 

Cir. 1949)). There is no requirement that the actor “‘also be aware that he is violating one of the Rules or Acts.’” Id. 

(quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 



 5 

submitted to Anita B. Bandy, with a copy to the Office of Chief Counsel of the Enforcement 

Division, no later than sixty (60) days from the date of the completion of the undertaking.   

 

IV. 

 

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

agreed to in Respondent War Chest’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act and Section 203(e) of the Advisers 

Act, Respondent War Chest shall cease and desist from committing or causing any violations and 

any future violations of Rule 105 of Regulation M of the Exchange Act;   

 

B. Respondent is censured; 

  

 C. Respondent shall pay disgorgement of $179,516, prejudgment interest of 

$22,302.02 and a civil penalty of $150,000 (for a total of $351,818.02), 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).   

 

Payment shall be made in the following installments: 

 

1. $51,818.02 within 30 days of entry of this Order; 

2. $30,000 within 60 days of entry of this Order; 

3. $30,000 within 90 days of entry of this Order; 

4. $30,000 within 120 days of entry of this Order; 

5. $30,000 within 150 days of entry of this Order; 

6. $30,000 within 180 days of entry of this Order; 

7. $30,000 within 210 days of entry of this Order; 

8. $30,000 within 240 days of entry of this Order; 

9. $30,000 within 270 days of entry of this Order; 

10. $30,000 within 300 days of entry of this Order; and 

11. $30,000, plus post-judgment interest on the payments described in Section IV.C.1-11 

pursuant to SEC Rule of Practice 600, within 330 days of entry of this Order. 

  

If any payment is not made by the date the payment is required by this Order, the entire 

outstanding balance of disgorgement, prejudgment interest, and civil penalties, plus any additional 

interest accrued pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. § 3717, shall be due 

and payable immediately, without further application.   

 

Payments must be made in one of the following ways: 

 



 6 

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

provide detailed ACH transfer/Fedwire instructions upon request;4 

 

(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 War 

Chest 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 Gerald W. Hodgkins, Associate Director, 

Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington, 

DC  20549. 

 

 D. 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. 

  

                                                 
4  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 

threshold, respondents must make payments pursuant to options (2) or (3) above. 



 7 

 

 E. Respondent shall comply with the undertakings enumerated in Paragraphs 15 and 16 

above. 

 

 

  

 By the Commission. 

 

 

 

       Brent J. Fields 

       Secretary