In re ADVENT CAPITAL

 
 
 
                                                 UNITED                                                 STATES OF AMERICA 
                                                                     Before                                                                     the                                                                     
                                    SECURITIES                                    AND                                    EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 73114 / September 16, 2014 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-16118 
 
 
In the Matter of 
 
ADVENT CAPITAL 
MANAGEMENT, LLC  
 
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 AND CIVIL 
PENALTY 
  
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 Advent Capital Management, LLC (“Advent 
Capital” 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 it 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 and Civil Penalty (“Order”), as set forth below.   
 
 
 
 

 
2
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 Advent Capital, a New York-based registered investment adviser.  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 two occasions, from February 2012 through October 2012, Advent Capital 
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 Rule 105 restricted period.  These 
violations collectively resulted in profits of $75,292.  
 
Respondent 
 
3. Advent Capital Management, LLC (“Advent”) is a Delaware limited liability 
company with its principal place of business in New York, New York.  Advent Capital 
Management, LLC has been registered with the Commission since May 2001, and manages 
investment advisory accounts for individuals, pension and profit sharing plans, trusts, insurance 
companies, private funds and other businesses and institutions.  Advent Capital Management, 
LLC has total assets under management in excess of $8.3 billion as of June 30, 2014.  
 
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).     
 
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. 
                                                 
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. 
 

 
3
 
 
 
Advent Capital’s Violations of Rule 105 of Regulation M 
 
 6.  On February 15, 2012, Advent Capital sold short 24,400 shares of Health Care 
REIT Inc. (“HCN”) during the restricted period at a price of $56.3700 per share.  On February 21, 
HCN priced a follow-on offering of its common stock at $53.50 per share.  Advent Capital 
received an allocation of 35,000 shares in that offering.  The difference between Advent Capital’s 
proceeds received from the restricted period short sales of HCN shares and the price paid for the 
24,400 shares received in the offering was $70,028.  Respondent also improperly obtained a 
benefit of $517.28 by purchasing the remaining 10,600 shares at a discount from HCN’s market 
price.  Thus, Advent Capital’s participation in the HCN offering resulted in total profits of 
$70,545.   
 
 7. On October 10, 2012, Advent Capital sold short 700 shares of Royal Gold, Inc. 
(“RGLD”) during the restricted period at a price of $95.4300 per share.  On October 11, 2012, 
RGLD priced a follow-on offering of its common stock at $91.00 per share.  Advent Capital 
received an allocation of 10,000 shares in that offering.  The difference between Advent Capital’s 
proceeds received from the restricted period short sales of RGLD shares and the price paid for the 
700 shares received in the offering was $3,101.  Respondent also improperly obtained a benefit of 
$1,646.10 by purchasing the remaining 9,300 shares at a discount from RGLD’s market price.  
Thus, Advent Capital’s participation in the RGLD offering resulted in total profits of $4,747.   
 
  8. In total, Advent Capital’s violations of Rule 105 resulted in profits of $75,292. 
 
Violations 
 
 9. As a result of the conduct described above, Advent Capital violated Rule 105 of 
Regulation M under the Exchange Act.  
 
Advent Capital’s Remedial Efforts & Cooperation 
10. In determining to accept the Offer, the Commission considered remedial 
acts promptly 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 Advent Capital’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 

 
4
 A. Pursuant to Section 21C of the Exchange Act, Respondent Advent Capital cease and 
desist from committing or causing any violations and any future violations of Rule 105 of 
Regulation M of the Exchange Act;   
 
 B. Advent Capital shall within fourteen (14) days of the entry of this Order, pay 
disgorgement of $75,292, prejudgment interest of $3,836.36, and a civil money penalty in the 
amount of $65,000 (for a total of $144,128.36) to the United States Treasury.  If timely payment is 
not made on the disgorgement amount, additional interest shall accrue pursuant to SEC Rule of 
Practice 600.  If timely payment is not made on the civil money penalty, additional interest shall 
accrue pursuant to 31 U.S.C. 3717.  Payments 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
 
(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  
Advent Capital 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. 
 
 
            By            the            Commission.            
 
 
 
                                                                                    Jill            M.            Peterson            
       Assistant Secretary 
 
                                                 
2
  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. 

UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 73114 / September 16, 2014 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-16118 
 
 
In the Matter of 
 
ADVENT CAPITAL 
MANAGEMENT, LLC  
 
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 AND CIVIL 
PENALTY 

  
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 Advent Capital Management, LLC (“Advent 
Capital” 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 it 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 and Civil Penalty (“Order”), as set forth below.   
 

 
 
 



 2

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 Advent Capital, a New York-based registered investment adviser.  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 two occasions, from February 2012 through October 2012, Advent Capital 
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 Rule 105 restricted period.  These 
violations collectively resulted in profits of $75,292.  
 

Respondent 
 

3. Advent Capital Management, LLC (“Advent”) is a Delaware limited liability 
company with its principal place of business in New York, New York.  Advent Capital 
Management, LLC has been registered with the Commission since May 2001, and manages 
investment advisory accounts for individuals, pension and profit sharing plans, trusts, insurance 
companies, private funds and other businesses and institutions.  Advent Capital Management, 
LLC has total assets under management in excess of $8.3 billion as of June 30, 2014.  
 

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).     

 
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. 

                                                 
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. 
 



 3

 
 
 

Advent Capital’s Violations of Rule 105 of Regulation M 
 
 6.  On February 15, 2012, Advent Capital sold short 24,400 shares of Health Care 
REIT Inc. (“HCN”) during the restricted period at a price of $56.3700 per share.  On February 21, 
HCN priced a follow-on offering of its common stock at $53.50 per share.  Advent Capital 
received an allocation of 35,000 shares in that offering.  The difference between Advent Capital’s 
proceeds received from the restricted period short sales of HCN shares and the price paid for the 
24,400 shares received in the offering was $70,028.  Respondent also improperly obtained a 
benefit of $517.28 by purchasing the remaining 10,600 shares at a discount from HCN’s market 
price.  Thus, Advent Capital’s participation in the HCN offering resulted in total profits of 
$70,545.   
 
 7. On October 10, 2012, Advent Capital sold short 700 shares of Royal Gold, Inc. 
(“RGLD”) during the restricted period at a price of $95.4300 per share.  On October 11, 2012, 
RGLD priced a follow-on offering of its common stock at $91.00 per share.  Advent Capital 
received an allocation of 10,000 shares in that offering.  The difference between Advent Capital’s 
proceeds received from the restricted period short sales of RGLD shares and the price paid for the 
700 shares received in the offering was $3,101.  Respondent also improperly obtained a benefit of 
$1,646.10 by purchasing the remaining 9,300 shares at a discount from RGLD’s market price.  
Thus, Advent Capital’s participation in the RGLD offering resulted in total profits of $4,747.   
 
  8. In total, Advent Capital’s violations of Rule 105 resulted in profits of $75,292. 
 

Violations 
 
 9. As a result of the conduct described above, Advent Capital violated Rule 105 of 
Regulation M under the Exchange Act.  

 
Advent Capital’s Remedial Efforts & Cooperation 

10. In determining to accept the Offer, the Commission considered remedial 
acts promptly 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 Advent Capital’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 



 4

 A. Pursuant to Section 21C of the Exchange Act, Respondent Advent Capital cease and 
desist from committing or causing any violations and any future violations of Rule 105 of 
Regulation M of the Exchange Act;   
 
 B. Advent Capital shall within fourteen (14) days of the entry of this Order, pay 
disgorgement of $75,292, prejudgment interest of $3,836.36, and a civil money penalty in the 
amount of $65,000 (for a total of $144,128.36) to the United States Treasury.  If timely payment is 
not made on the disgorgement amount, additional interest shall accrue pursuant to SEC Rule of 
Practice 600.  If timely payment is not made on the civil money penalty, additional interest shall 
accrue pursuant to 31 U.S.C. 3717.  Payments 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 

(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 
Advent Capital 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. 
 
 
 By the Commission. 
 
 
 
       Jill M. Peterson 
       Assistant Secretary 
 

                                                 
2  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.