In re EAST SIDE
summary
East Side Holdings II, Inc. violated Rule 105 of Regulation M by short-selling four stocks during restricted periods before participating in follow-on offerings, netting $26,613 in illicit profits, and agreed to a cease-and-desist order with a $157,010.38 penalty including disgorgement, interest, and a $130,000 civil fine.
paragraph
East Side Holdings II, Inc., a New Jersey-based proprietary trading firm, engaged in four violations of Rule 105 of Regulation M between November and December 2013 by short-selling equity securities—specifically TMUS, SDLP, GTAT, and BITA—during the restricted period prior to follow-on public offerings, then purchasing shares in those offerings at discounted prices. The SEC found these actions generated $26,613 in illicit profits, with additional benefits from price arbitrage, and determined that Rule 105 prohibits such conduct regardless of intent. East Side consented to a cease-and-desist order without admitting or denying the allegations, and was ordered to pay $26,613 in disgorgement, $397.38 in prejudgment interest, and a $130,000 civil penalty, totaling $157,010.38, payable in five installments over 360 days.
narrative
East Side Holdings II, Inc., a privately held proprietary trading firm based in Clifton, New Jersey, violated Rule 105 of Regulation M on four occasions between November and December 2013 by selling short equity securities during the restricted period preceding follow-on public offerings and then purchasing shares in those same offerings. Specifically, the firm short-sold 4,000 shares of T-Mobile US, Inc. (TMUS) in mid-November 2013, then purchased 60,150 shares in the follow-on offering at $25.00 per share, realizing $21,968 in total profits from the arbitrage and discounted pricing. It also short-sold 3,000 shares of Seadrill Ltd. (SDLP) and similarly benefited by purchasing 2,000 excess shares at a discount, gaining $826, and engaged in two additional violations involving GTAT and BITA. The SEC emphasized that Rule 105 is a prophylactic rule that prohibits such conduct irrespective of intent, as it distorts fair pricing in public offerings. East Side consented to a cease-and-desist order without admitting or denying the findings, except as to jurisdiction, and agreed to pay $26,613 in disgorgement, $397.38 in prejudgment interest, and a $130,000 civil penalty, totaling $157,010.38. The payment is structured in five installments over 360 days, with full immediate payment plus interest triggered by any missed installment. The SEC’s action underscores its commitment to preventing manipulative trading practices that undermine market integrity in secondary offerings.
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
east side
Keywords
east sideeastsideofferingrestricted periodrespondentsharescommissionordershortsecurities exchangeexchangesold shortperiodrestricted
Extracted insights
Dollar amounts 16
- $1.00M $1,000,000 $1M–$10M
- $157K $157,010 $100K–$1M
- $130K $130,000 $100K–$1M
- $31K $31,402 $10K–$100K
- $31K $31,402 $10K–$100K
- $27K $26,613 $10K–$100K
- $22K $21,968 $10K–$100K
- $19K $19,478 $10K–$100K
- $3K $3,049 <$10K
- $2K $2,490 <$10K
- $2K $1,950 <$10K
- $1K $1,098 <$10K
Entities 1
- person east side
Triples 9
- Securities And Exchange Commission Deems It Appropriate Cease-and-desist proceedings be instituted
- Respondent Submitted Offer of Settlement
- Commission Determined To accept the Offer
- Respondent Consents To Entry of 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
- East Side Bought Offering shares from an underwriter or broker or dealer participating in a follow-on public offering
- East Side Sold Short The same security during the Rule 105 restricted period
- Violations Resulted In Profits of $26,613
- 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
- Rule 105 Defines Restricted Period As the shorter of the period beginning five business days before the pricing of the offered securities and ending with such pricing
PDF
Text layers
Extracted body text (10,794c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73117 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16121
In the Matter of
EAST SIDE
HOLDINGS II,
INC.
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 East Side Holdings II, Inc. (“East Side” 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 East Side, a New Jersey-based privately held proprietary trading 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 four occasions, from November 2013 through December 2013, East Side
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 $26,613.
Respondent
3. East Side Holdings II, Inc. is a privately held proprietary trading firm located in
Clifton, New Jersey. East Side is incorporated under the laws of the state of Delaware. It is not
a registered investment adviser.
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
East Side’s Violations of Rule 105 of Regulation M
6. On November 13, 2013 and November 14, 2013, East Side sold short 4,000 shares
of T-Mobile US, Inc. (“TMUS”) during the restricted period at an average price of $25.7650 per
share. On November 14, 2013, TMUS announced the pricing of a follow-on offering of its
common stock at $25.00 per share. East Side received an allocation of 60,150 shares in that
offering. The difference between East Side’s proceeds from the restricted period short sales of
TMUS shares and the price paid for the 4,000 shares received in the offering was $2,490.
Respondent also improperly obtained a benefit of $19,478.44 by purchasing the remaining 56,150
shares at a discount from TMUS’s market price. Thus, East Side’s participation in the TMUS
offering resulted in total profits of $21,968.
7. On December 3, 2013, East Side sold short 3,000 shares of Seadrill Ltd. (“SDLP”)
during the restricted period at a price of $29.5000 per share. On December 4, 2013, SDLP priced a
follow-on offering of its common stock at $29.50 per share. East Side received an allocation of
5,000 shares in that offering. Although the offering price was the same as the price at which
Respondent sold short during the restricted period, Respondent improperly obtained a benefit of
$826 by purchasing the remaining 2,000 shares at a discount from SDLP’s market price. Thus,
East Side’s participation in the SDLP offering resulted in total profits of $826.
8. On December 4, 2013, East Side sold short 5,000 shares of GT Advanced
Technologies Inc. (“GTAT”) during the restricted period at a price of $9.0400 per share. On
December 5, 2013, GTAT announced the pricing of a follow-on offering of its common stock at
$8.65 per share. East Side received an allocation of 8,950 shares in that offering. The difference
between East Side’s proceeds from the restricted period short sales of GTAT shares and the price
paid for the 5,000 shares received in the offering was $1,950. Respondent also improperly
obtained a benefit of $1,098.50 by purchasing the remaining 3,950 shares at a discount from
GTAT’s market price. Thus, East Side’s participation in the GTAT offering resulted in total
profits of $3,049.
9. On December 5, 2013, East Side sold short 1,000 shares of Bitauto Holdings Ltd.
(“BITA”) during the restricted period at a price of $30.7700 per share. On December 6, 2013,
BITA priced a follow-on offering of its common stock at $30.00 per share. East Side received an
allocation of 2,085 shares in that offering. The difference between East Side’s proceeds received
from the restricted period short sales of BITA shares and the price paid for the 1,000 shares
received in the offering was $770. Thus, East Side’s participation in the BITA offering resulted in
total profits of $770.
10. In total, East Side’s violations of Rule 105 resulted in profits of $26,613.
Violations
11. As a result of the conduct described above, East Side violated Rule 105 of
Regulation M under the Exchange Act.
4
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent East Side’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent East Side cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;
B. East Side shall pay disgorgement of $26,613, prejudgment interest of $397.38,
and a civil money penalty in the amount of $130,000 (for a total of $157,010.38) to the United
States Treasury. Payments shall be made in the following installments:
1. $31,402.08 on the day of entry of this Order;
2. $31,402 within 90 days of entry of this Order;
3. $31,402 within 180 days of entry of this Order:
4. $31,402 within 270 days of entry of this Order
5. $31,402.30, plus post-judgment interest on the payments described in Section IV.B.1-4
pursuant to SEC Rule of Practice 600, within 360 days of entry of this Order.
Prior to making the payment described in Section IV.B.5, Respondent shall contact the
Commission staff to ensure the inclusion of post-judgment interest. If any payment is not made by
the date the payment is required by Section IV.B.1-5 of 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:
(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
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.
5
Payments by check or money order must be accompanied by a cover letter identifying East
Side 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
OCR text (10,227c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73117 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16121
In the Matter of
EAST SIDE
HOLDINGS II,
INC.
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 East Side Holdings II, Inc. (“East Side” 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 East Side, a New Jersey-based privately held proprietary trading 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 four occasions, from November 2013 through December 2013, East Side
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 $26,613.
Respondent
3. East Side Holdings II, Inc. is a privately held proprietary trading firm located in
Clifton, New Jersey. East Side is incorporated under the laws of the state of Delaware. It is not
a registered investment adviser.
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
East Side’s Violations of Rule 105 of Regulation M
6. On November 13, 2013 and November 14, 2013, East Side sold short 4,000 shares
of T-Mobile US, Inc. (“TMUS”) during the restricted period at an average price of $25.7650 per
share. On November 14, 2013, TMUS announced the pricing of a follow-on offering of its
common stock at $25.00 per share. East Side received an allocation of 60,150 shares in that
offering. The difference between East Side’s proceeds from the restricted period short sales of
TMUS shares and the price paid for the 4,000 shares received in the offering was $2,490.
Respondent also improperly obtained a benefit of $19,478.44 by purchasing the remaining 56,150
shares at a discount from TMUS’s market price. Thus, East Side’s participation in the TMUS
offering resulted in total profits of $21,968.
7. On December 3, 2013, East Side sold short 3,000 shares of Seadrill Ltd. (“SDLP”)
during the restricted period at a price of $29.5000 per share. On December 4, 2013, SDLP priced a
follow-on offering of its common stock at $29.50 per share. East Side received an allocation of
5,000 shares in that offering. Although the offering price was the same as the price at which
Respondent sold short during the restricted period, Respondent improperly obtained a benefit of
$826 by purchasing the remaining 2,000 shares at a discount from SDLP’s market price. Thus,
East Side’s participation in the SDLP offering resulted in total profits of $826.
8. On December 4, 2013, East Side sold short 5,000 shares of GT Advanced
Technologies Inc. (“GTAT”) during the restricted period at a price of $9.0400 per share. On
December 5, 2013, GTAT announced the pricing of a follow-on offering of its common stock at
$8.65 per share. East Side received an allocation of 8,950 shares in that offering. The difference
between East Side’s proceeds from the restricted period short sales of GTAT shares and the price
paid for the 5,000 shares received in the offering was $1,950. Respondent also improperly
obtained a benefit of $1,098.50 by purchasing the remaining 3,950 shares at a discount from
GTAT’s market price. Thus, East Side’s participation in the GTAT offering resulted in total
profits of $3,049.
9. On December 5, 2013, East Side sold short 1,000 shares of Bitauto Holdings Ltd.
(“BITA”) during the restricted period at a price of $30.7700 per share. On December 6, 2013,
BITA priced a follow-on offering of its common stock at $30.00 per share. East Side received an
allocation of 2,085 shares in that offering. The difference between East Side’s proceeds received
from the restricted period short sales of BITA shares and the price paid for the 1,000 shares
received in the offering was $770. Thus, East Side’s participation in the BITA offering resulted in
total profits of $770.
10. In total, East Side’s violations of Rule 105 resulted in profits of $26,613.
Violations
11. As a result of the conduct described above, East Side violated Rule 105 of
Regulation M under the Exchange Act.
4
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent East Side’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent East Side cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;
B. East Side shall pay disgorgement of $26,613, prejudgment interest of $397.38,
and a civil money penalty in the amount of $130,000 (for a total of $157,010.38) to the United
States Treasury. Payments shall be made in the following installments:
1. $31,402.08 on the day of entry of this Order;
2. $31,402 within 90 days of entry of this Order;
3. $31,402 within 180 days of entry of this Order:
4. $31,402 within 270 days of entry of this Order
5. $31,402.30, plus post-judgment interest on the payments described in Section IV.B.1-4
pursuant to SEC Rule of Practice 600, within 360 days of entry of this Order.
Prior to making the payment described in Section IV.B.5, Respondent shall contact the
Commission staff to ensure the inclusion of post-judgment interest. If any payment is not made by
the date the payment is required by Section IV.B.1-5 of 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:
(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
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.
5
Payments by check or money order must be accompanied by a cover letter identifying East
Side 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