In re JAMES C. PARSONS
summary
James C. Parsons violated Rule 105 of Regulation M by short-selling 2,673 shares of Virtus Investment Partners during a restricted period in September 2013 and then purchasing 20,000 shares in the follow-on offering, generating $135,531 in illicit profits, leading to an SEC cease-and-desist order and a $206,360.62 total penalty.
paragraph
James C. Parsons, a New York-based trader, violated Rule 105 of Regulation M by selling short 2,673 shares of Virtus Investment Partners, Inc. (VRTS) during the restricted period before its September 2013 follow-on offering, then purchasing 20,000 shares at $155 per share. His illegal trades yielded $135,531 in profits—$37,114 from the price differential on the shorted shares and $98,417 from selling the remaining 17,327 shares at a premium. The SEC ordered him to cease and desist, pay $135,531 in disgorgement, $3,063.90 in prejudgment interest, and a $67,765.72 civil penalty, totaling $206,360.62, after he cooperated and took remedial actions.
narrative
James C. Parsons, a 40-year-old resident of New York, violated Rule 105 of Regulation M under the Securities Exchange Act of 1934 by selling short 2,673 shares of Virtus Investment Partners, Inc. (VRTS) during the restricted period in September 2013, which began five business days before the pricing of the company’s follow-on offering. On September 11, 2013, VRTS priced its offering at $155 per share, and Parsons received an allocation of 20,000 shares, purchasing them despite having shorted the stock during the prohibited window. His illicit gains totaled $135,531, comprising $37,114 from the difference between his short sale proceeds and the purchase price of the 2,673 matching shares, and $98,417 from selling the remaining 17,327 shares at a premium above the offering price. Rule 105 is a prophylactic rule designed to prevent market manipulation in public offerings, regardless of intent, and Parsons’ conduct directly undermined its purpose. Without admitting or denying the findings, Parsons consented to an SEC cease-and-desist order and agreed to pay $135,531 in disgorgement, $3,063.90 in prejudgment interest, and a $67,765.72 civil penalty, totaling $206,360.62. The SEC accepted his settlement after considering his prompt remedial actions and cooperation with staff. All payments were required to be submitted to the SEC’s Enforcement Division in Washington, D.C., with proper identification of the proceeding and respondent.
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
james c. parsonsSecurities and Exchange Commission
Keywords
parsonsrespondentcommissionsecurities exchangeexchangeofferingjames parsonsrestricted periodsecuritiesorderproceedingsshortpursuantsharesexchange commission
Extracted insights
Dollar amounts 10
- $1.00M $1,000,000 $1M–$10M
- $206K $206,360 $100K–$1M
- $136K $135,531 $100K–$1M
- $98K $98,417 $10K–$100K
- $68K $67,765 $10K–$100K
- $37K $37,114 $10K–$100K
- $3K $3,063 <$10K
- $169 $168.8848 <$10K
- $161 $160.68 <$10K
- $155 $155 <$10K
Entities 2
- person james c. parsons
- agency Securities and Exchange Commission
Triples 8
- James C. Parsons violated Rule 105 of Regulation M of the Securities Exchange Act of 1934
- James C. Parsons sold short equity security during Rule 105 restricted period
- James C. Parsons purchased offering shares from underwriter in September 2013
- James C. Parsons generated $135,531 in profits from violation
- James C. Parsons resides in New York, New York
- SEC instituted cease-and-desist proceedings against James C. Parsons
- SEC issued Release No. 73123 on September 16, 2014
- Rule 105 prohibits short selling equity security subject to public offering and purchasing from underwriter during restricted period
PDF
Text layers
Extracted body text (8,311c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73123 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16127
In the Matter of
JAMES C. PARSONS
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 James C. Parsons (“Parsons” 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 a violation of Rule 105 of Regulation M of the
Exchange Act by James C. Parsons, a resident of New York. 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. In September 2013, Parsons 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. This violation resulted in profits of $135,531.
Respondent
3. James C. Parsons, age 40, resides in New York, New York. During all relevant
times, Parsons engaged in trading for the benefit of his personal trading accounts.
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.
Respondent’s Violation of Rule 105 of Regulation M
6. On September 10, 2013, Parsons sold short 2,673 shares of Virtus Investment
Partners, Inc. (“VRTS”) during the restricted period at a price of $168.8848 per share. On
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
September 11, 2013, VRTS priced a follow-on offering of its common stock at $155 per share.
Parsons received an allocation of 20,000 shares in that offering. The difference between
Respondent’s proceeds received from the restricted period short sales of VRTS shares and the
price paid for the 2,673 shares received in the offering was $37,114.07. Respondent also
improperly obtained a benefit of $98,417.36 by selling the remaining 17,327 shares at a premium
compared to VRTS’s offering price.
2
Thus, Parsons’ participation in the VRTS offering resulted in
total profits of $135,531.
7. In total, Parsons’ violation of Rule 105 resulted in profits of $135,531.
Violation
8. As a result of the conduct described above, Parsons violated Rule 105 of Regulation
M under the Exchange Act.
Parsons’ Remedial Efforts & Cooperation
9. 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 Parsons’ Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Parsons cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;
B. Parsons shall within fourteen (14) days of the entry of this Order, pay disgorgement
of $135,531, prejudgment interest of $3,063.90, and a civil money penalty in the amount of
$67,765.72 (for a total of $206,360.62) 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;
3
2
Parsons sold the overage shares he purchased in the offering on September 16, 2013, two business days after the
offering priced after the close on September 11, 2013. He sold all of the shares at $160.68 per share.
3
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.
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
Parsons 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 (7,738c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73123 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16127
In the Matter of
JAMES C. PARSONS
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 James C. Parsons (“Parsons” 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 a violation of Rule 105 of Regulation M of the
Exchange Act by James C. Parsons, a resident of New York. 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. In September 2013, Parsons 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. This violation resulted in profits of $135,531.
Respondent
3. James C. Parsons, age 40, resides in New York, New York. During all relevant
times, Parsons engaged in trading for the benefit of his personal trading accounts.
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.
Respondent’s Violation of Rule 105 of Regulation M
6. On September 10, 2013, Parsons sold short 2,673 shares of Virtus Investment
Partners, Inc. (“VRTS”) during the restricted period at a price of $168.8848 per share. On
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
September 11, 2013, VRTS priced a follow-on offering of its common stock at $155 per share.
Parsons received an allocation of 20,000 shares in that offering. The difference between
Respondent’s proceeds received from the restricted period short sales of VRTS shares and the
price paid for the 2,673 shares received in the offering was $37,114.07. Respondent also
improperly obtained a benefit of $98,417.36 by selling the remaining 17,327 shares at a premium
compared to VRTS’s offering price.2 Thus, Parsons’ participation in the VRTS offering resulted in
total profits of $135,531.
7. In total, Parsons’ violation of Rule 105 resulted in profits of $135,531.
Violation
8. As a result of the conduct described above, Parsons violated Rule 105 of Regulation
M under the Exchange Act.
Parsons’ Remedial Efforts & Cooperation
9. 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 Parsons’ Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Parsons cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;
B. Parsons shall within fourteen (14) days of the entry of this Order, pay disgorgement
of $135,531, prejudgment interest of $3,063.90, and a civil money penalty in the amount of
$67,765.72 (for a total of $206,360.62) 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;3
2 Parsons sold the overage shares he purchased in the offering on September 16, 2013, two business days after the
offering priced after the close on September 11, 2013. He sold all of the shares at $160.68 per share.
3 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.
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
Parsons 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