In re BLACKROCK
summary
BlackRock Institutional Trust Company, N.A. violated Rule 105 of Regulation M by short-selling shares of PVH Corp., MetLife, and EOG Resources during restricted periods before purchasing them in follow-on offerings, generating $1,122,400 in illicit profits, and agreed to a cease-and-desist order and $1.68M in penalties without admitting or denying wrongdoing.
paragraph
BlackRock Institutional Trust Company, N.A. violated Rule 105 of Regulation M on three occasions between April 2010 and March 2011 by short-selling shares of PVH Corp., MetLife, and EOG Resources during the restricted period prior to purchasing those same securities in follow-on public offerings, resulting in $1,122,400 in illicit profits. The SEC found that BlackRock improperly benefited from price disparities between its short sales and the offering prices, even when the offering price was lower than the short-sale price, because Rule 105 prohibits the conduct regardless of intent. Without admitting or denying the allegations, BlackRock consented to a cease-and-desist order and agreed to pay $1,122,400 in disgorgement, $22,471.13 in prejudgment interest, and a $530,479 civil penalty, totaling $1,675,350.13.
narrative
BlackRock Institutional Trust Company, N.A., a San Francisco-based trust company with $1.1 trillion in assets under management, violated Rule 105 of Regulation M on three occasions between April 2010 and March 2011 by engaging in prohibited short sales of equity securities during the restricted period before purchasing shares in follow-on public offerings. Specifically, BlackRock short-sold 3,377 shares of PVH Corp. in April 2010, then purchased 60,000 shares in its follow-on offering, realizing $60,711 in improper gains; short-sold 15,011 shares of MetLife in August 2010 and purchased over 1.2 million shares in its offering, gaining $308,905 in improper benefits; and engaged in a similar violation involving EOG Resources, with total illicit profits across all three transactions amounting to $1,122,400. Rule 105 prohibits such conduct regardless of intent, as it undermines market integrity by allowing traders to manipulate pricing dynamics in public offerings. The SEC found that BlackRock’s actions, though not necessarily motivated by fraud, still violated the prophylactic nature of the rule designed to ensure fair pricing. BlackRock consented to a cease-and-desist order without admitting or denying the findings, but acknowledged the SEC’s jurisdiction and the factual basis of the violations. As part of the settlement, BlackRock agreed to disgorge $1,122,400 in profits, pay $22,471.13 in prejudgment interest, and a $530,479 civil penalty, totaling $1,675,350.13, to be paid via electronic transfer to the U.S. Treasury. The SEC noted BlackRock’s cooperation and remedial efforts as mitigating factors in accepting the settlement.
Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →
Statutes
31 U.S.C. 371717 C.F.R. § 242.10517 C.F.R. § 242.105(a)SECTION 21C OF THE SECURITIES EXCHANGE ACT
Parties
san franciscoSecurities and Exchange Commission
Keywords
blackrockofferingrestricted periodcommissionrespondentsecurities exchangeexchangesharesshortsold shortperiodsecuritiesorderproceedingsrestricted
Extracted insights
Dollar amounts 16
- $1100.00B $1.1 trillion ≥$1B
- $1.68M $1,675,350 $1M–$10M
- $1.12M $1,122,400 $1M–$10M
- $1.00M $1,000,000 $1M–$10M
- $753K $752,785 $100K–$1M
- $715K $714,721 $100K–$1M
- $530K $530,479 $100K–$1M
- $309K $308,904 $100K–$1M
- $298K $297,972 $100K–$1M
- $61K $60,711 $10K–$100K
- $61K $60,711 $10K–$100K
- $38K $38,064 $10K–$100K
Entities 2
- person san francisco
- agency Securities and Exchange Commission
Triples 10
- BlackRock Institutional Trust Company, N.A. violated Rule 105 of Regulation M of the Securities Exchange Act of 1934
- BlackRock Institutional Trust Company, N.A. bought offering shares from underwriter or broker or dealer participating in follow-on public offering
- BlackRock Institutional Trust Company, N.A. sold short equity securities during restricted period
- BlackRock Institutional Trust Company, N.A. generated profits of $1,122,400
- BlackRock Institutional Trust Company, N.A. has assets under management of $1.1 trillion as of March 31, 2014
- BlackRock Institutional Trust Company, N.A. is organized under laws of the United States
- BlackRock Institutional Trust Company, N.A. has principal office in San Francisco
- SEC instituted cease-and-desist proceedings against BlackRock Institutional Trust Company, N.A.
- Rule 105 violations occurred from April 2010 through March 2011
- BlackRock Institutional Trust Company, N.A. submitted Offer of Settlement
PDF
Text layers
Extracted body text (9,774c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73116 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16120
In the Matter of
BLACKROCK
INSTITUTIONAL TRUST
COMPANY, N.A.
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 BlackRock Institutional Trust Company, N.A.
(“BlackRock” 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.
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 BlackRock, a San Francisco-based national banking association. 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 three occasions, from April 2010 through March 2011, BlackRock 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 $1,122,400.
Respondent
3. BlackRock Institutional Trust Company, N.A. is a national banking association
organized under the laws of the United States that operates as a limited purpose trust company.
BlackRock has its principal office in San Francisco and has approximately $1.1 trillion in assets
under management as of March 31, 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.
BlackRock’s Violations of Rule 105 of Regulation M
6. On April 21, 2010, BlackRock sold short 3,377 shares of PVH Corp. (“PVH”)
during the restricted period at a price of $64.73 per share. On April 22, 2010, PVH priced a
follow-on offering of its common stock at $66.50 per share. BlackRock received an allocation of
60,000 shares in that offering. Although the offering price was greater than the price at which
BlackRock sold short during the restricted period, BlackRock improperly received a benefit of
$60,711 by purchasing 56,623 shares in the offering at a discount from PVH’s market price. Thus,
BlackRock’s participation in the 2010 PVH offering resulted in total profits of $60,711.
7. On August 2, 2010, BlackRock sold short 15,011 shares of MetLife, Inc. (“MET”)
during the restricted period at a price of $42.73 per share. On August 2, 2010, MET priced a
follow-on offering of its common stock at $42 per share. BlackRock received an allocation of
1,218,451 shares in that offering. The difference between BlackRock’s proceeds received from the
restricted period short sales of MET shares and the price paid for 15,011 shares received in the
offering was $10,933. Respondent also improperly received a benefit of $297,972 by purchasing
the remaining 1,203,440 shares at a discount from MET’s market price. Thus, BlackRock’s
participation in the 2010 MET offering resulted in total profits of $308,904.
8. On March 1, 2011, BlackRock sold short 10,715 shares of EOG Resources, Inc.
(“EOG”) during the restricted period at a price of $109.05 per share. On March 1, 2011, EOG
priced a follow-on offering of its common stock at $105.50 per share. BlackRock received an
allocation of 650,000 shares in that offering. The difference between BlackRock’s proceeds
received from the restricted period short sales of EOG shares and the price paid for 10,715 shares
received in the offering was $38,064. Respondent also improperly received a benefit of $714,721
by purchasing the remaining 639,285 shares at a discount from EOG’s market price. Thus,
BlackRock’s participation in the 2011 EOG offering resulted in total profits of $752,785.
9. In total, BlackRock’s violations of Rule 105 resulted in profits of $1,122,400.
Violations
10. As a result of the conduct described above, BlackRock violated Rule 105 of
Regulation M under the Exchange Act.
BlackRock’s Remedial Efforts & Cooperation
11. 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 BlackRock’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent BlackRock cease and
desist from committing or causing any violations and any future violations of Rule 105 of
Regulation M of the Exchange Act;
B. BlackRock shall within fourteen (14) days of the entry of this Order, pay
disgorgement of $1,122,400, prejudgment interest of $22,471.13, and a civil money penalty in the
amount of $530,479 (for a total of $1,675,350.13) 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
BlackRock 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. OCR text (9,203c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73116 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16120
In the Matter of
BLACKROCK
INSTITUTIONAL TRUST
COMPANY, N.A.
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 BlackRock Institutional Trust Company, N.A.
(“BlackRock” 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.
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 BlackRock, a San Francisco-based national banking association. 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 three occasions, from April 2010 through March 2011, BlackRock 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 $1,122,400.
Respondent
3. BlackRock Institutional Trust Company, N.A. is a national banking association
organized under the laws of the United States that operates as a limited purpose trust company.
BlackRock has its principal office in San Francisco and has approximately $1.1 trillion in assets
under management as of March 31, 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.
BlackRock’s Violations of Rule 105 of Regulation M
6. On April 21, 2010, BlackRock sold short 3,377 shares of PVH Corp. (“PVH”)
during the restricted period at a price of $64.73 per share. On April 22, 2010, PVH priced a
follow-on offering of its common stock at $66.50 per share. BlackRock received an allocation of
60,000 shares in that offering. Although the offering price was greater than the price at which
BlackRock sold short during the restricted period, BlackRock improperly received a benefit of
$60,711 by purchasing 56,623 shares in the offering at a discount from PVH’s market price. Thus,
BlackRock’s participation in the 2010 PVH offering resulted in total profits of $60,711.
7. On August 2, 2010, BlackRock sold short 15,011 shares of MetLife, Inc. (“MET”)
during the restricted period at a price of $42.73 per share. On August 2, 2010, MET priced a
follow-on offering of its common stock at $42 per share. BlackRock received an allocation of
1,218,451 shares in that offering. The difference between BlackRock’s proceeds received from the
restricted period short sales of MET shares and the price paid for 15,011 shares received in the
offering was $10,933. Respondent also improperly received a benefit of $297,972 by purchasing
the remaining 1,203,440 shares at a discount from MET’s market price. Thus, BlackRock’s
participation in the 2010 MET offering resulted in total profits of $308,904.
8. On March 1, 2011, BlackRock sold short 10,715 shares of EOG Resources, Inc.
(“EOG”) during the restricted period at a price of $109.05 per share. On March 1, 2011, EOG
priced a follow-on offering of its common stock at $105.50 per share. BlackRock received an
allocation of 650,000 shares in that offering. The difference between BlackRock’s proceeds
received from the restricted period short sales of EOG shares and the price paid for 10,715 shares
received in the offering was $38,064. Respondent also improperly received a benefit of $714,721
by purchasing the remaining 639,285 shares at a discount from EOG’s market price. Thus,
BlackRock’s participation in the 2011 EOG offering resulted in total profits of $752,785.
9. In total, BlackRock’s violations of Rule 105 resulted in profits of $1,122,400.
Violations
10. As a result of the conduct described above, BlackRock violated Rule 105 of
Regulation M under the Exchange Act.
BlackRock’s Remedial Efforts & Cooperation
11. 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 BlackRock’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent BlackRock cease and
desist from committing or causing any violations and any future violations of Rule 105 of
Regulation M of the Exchange Act;
B. BlackRock shall within fourteen (14) days of the entry of this Order, pay
disgorgement of $1,122,400, prejudgment interest of $22,471.13, and a civil money penalty in the
amount of $530,479 (for a total of $1,675,350.13) 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
BlackRock 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.