In re NOB HILL CAPITAL
summary
Nob Hill Capital Management, Inc. violated Rule 105 of Regulation M by short-selling shares of CYS, WSR, and NTWK during restricted periods before purchasing shares in follow-on offerings, earning $95,902 in illicit profits, and agreed to a cease-and-desist order without admitting guilt, with disgorgement waived due to financial hardship but subject to reopening if disclosures are found fraudulent.
paragraph
Nob Hill Capital Management, Inc., a San Francisco-based registered investment adviser, violated Rule 105 of Regulation M by short-selling equity securities of Cypress Sharpridge Investments (CYS), Whitestone REIT (WSR), and NTWK during restricted periods prior to three follow-on public offerings between December 2010 and March 2012, resulting in $95,902 in illicit profits. The SEC instituted cease-and-desist proceedings and accepted Nob Hill’s settlement offer, which included a cease-and-desist order and waiver of disgorgement ($95,902) and prejudgment interest ($6,662.62) based on sworn financial disclosures showing inability to pay. No civil penalty was imposed, but the SEC preserved the right to reopen the case if the financial hardship claims are later proven false or misleading.
narrative
Nob Hill Capital Management, Inc., a San Francisco-based registered investment adviser with $24.8 million in assets under management at the time, violated Rule 105 of Regulation M by engaging in prohibited short sales of equity securities during restricted periods preceding three follow-on public offerings between December 2010 and March 2012. Specifically, Nob Hill short-sold shares of Cypress Sharpridge Investments (CYS), Whitestone REIT (WSR), and NTWK, then purchased shares in the subsequent offerings at discounted prices, generating $95,902 in illicit profits. The SEC instituted cease-and-desist proceedings and accepted Nob Hill’s settlement offer, in which the firm consented to a cease-and-desist order without admitting or denying the findings. Disgorgement of $95,902 and prejudgment interest of $6,662.62 were ordered but waived due to Nob Hill’s sworn financial hardship and ongoing liquidation, with no civil penalty imposed. The SEC explicitly reserved the right to reopen the case solely to challenge the accuracy of Nob Hill’s financial disclosures, while Nob Hill agreed not to contest any findings or liability in such a proceeding. Rule 105 is a prophylactic rule designed to prevent market manipulation by prohibiting short-selling before public offerings, regardless of intent. The case underscores the SEC’s commitment to enforcing market integrity even when penalties are waived due to financial constraints.
Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →
Statutes
17 C.F.R. § 242.10517 C.F.R. § 242.105(a)SECTION 21C OF THE SECURITIES EXCHANGE ACT
Parties
cease-and-desist proceedings against nob hill capital management, inc.investment advisernob hill capital management, inc.san franciscoSecurities and Exchange Commission
Keywords
nobhillrespondentcommissionrestricted periodofferingsharesshortexchangesecurities exchangeperiodrestrictedorderreceivedhill capital
Extracted insights
Dollar amounts 10
- $96K $95,902 $10K–$100K
- $96K $95,902 $10K–$100K
- $83K $82,661 $10K–$100K
- $46K $45,870 $10K–$100K
- $37K $36,791 $10K–$100K
- $10K $9,961 <$10K
- $10K $9,566 <$10K
- $7K $6,662 <$10K
- $3K $3,280 <$10K
- $395 $395 <$10K
Entities 5
- company cease-and-desist proceedings against nob hill capital management, inc.
- person investment adviser
- company nob hill capital management, inc.
- person san francisco
- agency Securities and Exchange Commission
Triples 10
- Nob Hill Capital Management, Inc. violated Rule 105 of Regulation M of the Securities Exchange Act of 1934
- Nob Hill Capital Management, Inc. sold short equity securities during restricted period
- Nob Hill Capital Management, Inc. purchased offering shares from underwriter or broker-dealer
- Nob Hill Capital Management, Inc. generated $95,902 in profits from violations
- Nob Hill Capital Management, Inc. had $24.8 million in assets under management as of September 26, 2011
- Nob Hill Capital Management, Inc. is organized under laws of California
- Nob Hill Capital Management, Inc. is based in San Francisco
- SEC instituted cease-and-desist proceedings against Nob Hill Capital Management, Inc.
- Violations occurred December 2010 through March 2012
- Nob Hill Capital Management, Inc. was registered as investment adviser
PDF
Text layers
Extracted body text (9,809c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73108 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16112
In the Matter of
NOB HILL CAPITAL
MANAGEMENT, 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 Nob Hill Capital Management, Inc. (“Nob Hill”
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 Nob Hill, which, at the time of the violations, was a San Francisco-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 three occasions, from December 2010 through March 2012, Nob Hill 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 $95,902.
Respondent
3. Nob Hill Capital Management, Inc. is a corporation organized under the laws of
California with its principal place of business in San Francisco. Nob Hill, which is currently in
liquidation, was a registered investment adviser at the time of the violations and had $24.8
million in assets under management when it filed its most recent Form ADV with the
Commission on September 26, 2011.
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
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.
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.
Nob Hill’s Violations of Rule 105 of Regulation M
6. On December 9, 2010, Nob Hill sold short 75,000 shares of Cypress Sharpridge
Investments, Inc. (“CYS”) during the restricted period at prices ranging from $12.64 to $13.24 per
share. On December 10, 2010, CYS priced a follow-on offering of its common stock at $12.46 per
share. Nob Hill received an allocation of 225,000 shares in that offering. The difference between
Nob Hill’s proceeds received from the restricted period short sales of CYS shares and the price
paid for 75,000 shares received in the offering was $36,791. Respondent also improperly received
a benefit of $45,870 by purchasing the remaining 150,000 shares at a discount from CYS’ market
price. Thus, Nob Hill’s participation in the 2010 CYS offering resulted in total profits of $82,661.
7. From April 28, 2011 through May 4, 2011, Nob Hill sold short 18,500 shares of
Whitestone REIT, Inc. (“WSR”) during the restricted period at prices ranging from $12.80 to
$14.10 per share. On May 5, 2011, WSR priced a follow-on offering of its common stock at $12
per share. Nob Hill received an allocation of 25,000 shares in that offering. The difference
between Nob Hill’s proceeds received from the restricted period short sales of WSR shares and the
price paid for 18,500 shares received in the offering was $9,566. Respondent also improperly
received a benefit of $395 by purchasing the remaining 6,500 shares at a discount from WSR’s
market price. Thus, Nob Hill’s participation in the 2011 WSR offering resulted in total profits of
$9,961.
8. From February 27, 2012 through March 1, 2012, Nob Hill sold short 97,500 shares
of NetSol Technologies, Inc. (“NTWK”) during the restricted period at prices ranging from $0.47
to $0.56 per share. On March 1, 2012, NTWK priced a follow-on offering of its common stock at
$0.40 per share. Nob Hill received an allocation of 44,500 shares in that offering. The difference
between Nob Hill’s proceeds received from the restricted period short sales of NTWK shares and
the price paid for 44,500 shares received in the offering was $3,280. Thus, Nob Hill’s participation
in the 2012 NTWK offering resulted in total profits of $3,280.
9. In total, Nob Hill’s violations of Rule 105 resulted in profits of $95,902.
Violations
10. As a result of the conduct described above, Nob Hill violated Rule 105 of
Regulation M under the Exchange Act.
Nob Hill’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.
Disgorgement and Civil Penalties
12. Respondent has submitted a sworn Statement of Financial Condition dated
July 7, 2014 and other evidence and has asserted its inability to pay disgorgement plus
prejudgment interest or a civil penalty.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent Nob Hill’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Nob Hill 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 shall pay disgorgement of $95,902 and prejudgment interest of
$6,662.62, but that payment of such amount is waived based upon Respondent’s sworn
representations in its Statement of Financial Condition dated July 7, 2014 and other documents
provided to the Commission. Based upon Respondent's sworn representations in its Statement of
Financial Condition dated July 7, 2014 and other documents submitted to the Commission, the
Commission is not imposing a penalty against Respondent.
C. The Division of Enforcement ("Division") may, at any time following the entry of
this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent
provided accurate and complete financial information at the time such representations were made;
and (2) seek an order directing payment of disgorgement, pre-judgment interest and the maximum
penalty allowable under the law. No other issue shall be considered in connection with this
petition other than whether the financial information provided by Respondent was fraudulent,
misleading, inaccurate, or incomplete in any material respect. Respondent may not, by way of
defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of
disgorgement and interest should not be ordered; (3) contest the amount of disgorgement and
interest to be ordered; or (4) assert any defense to liability or remedy, including, but not limited to,
any statute of limitations defense.
By the Commission.
Jill M. Peterson
Assistant Secretary
OCR text (9,248c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73108 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16112
In the Matter of
NOB HILL CAPITAL
MANAGEMENT, 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 Nob Hill Capital Management, Inc. (“Nob Hill”
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 Nob Hill, which, at the time of the violations, was a San Francisco-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 three occasions, from December 2010 through March 2012, Nob Hill 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 $95,902.
Respondent
3. Nob Hill Capital Management, Inc. is a corporation organized under the laws of
California with its principal place of business in San Francisco. Nob Hill, which is currently in
liquidation, was a registered investment adviser at the time of the violations and had $24.8
million in assets under management when it filed its most recent Form ADV with the
Commission on September 26, 2011.
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
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.
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.
Nob Hill’s Violations of Rule 105 of Regulation M
6. On December 9, 2010, Nob Hill sold short 75,000 shares of Cypress Sharpridge
Investments, Inc. (“CYS”) during the restricted period at prices ranging from $12.64 to $13.24 per
share. On December 10, 2010, CYS priced a follow-on offering of its common stock at $12.46 per
share. Nob Hill received an allocation of 225,000 shares in that offering. The difference between
Nob Hill’s proceeds received from the restricted period short sales of CYS shares and the price
paid for 75,000 shares received in the offering was $36,791. Respondent also improperly received
a benefit of $45,870 by purchasing the remaining 150,000 shares at a discount from CYS’ market
price. Thus, Nob Hill’s participation in the 2010 CYS offering resulted in total profits of $82,661.
7. From April 28, 2011 through May 4, 2011, Nob Hill sold short 18,500 shares of
Whitestone REIT, Inc. (“WSR”) during the restricted period at prices ranging from $12.80 to
$14.10 per share. On May 5, 2011, WSR priced a follow-on offering of its common stock at $12
per share. Nob Hill received an allocation of 25,000 shares in that offering. The difference
between Nob Hill’s proceeds received from the restricted period short sales of WSR shares and the
price paid for 18,500 shares received in the offering was $9,566. Respondent also improperly
received a benefit of $395 by purchasing the remaining 6,500 shares at a discount from WSR’s
market price. Thus, Nob Hill’s participation in the 2011 WSR offering resulted in total profits of
$9,961.
8. From February 27, 2012 through March 1, 2012, Nob Hill sold short 97,500 shares
of NetSol Technologies, Inc. (“NTWK”) during the restricted period at prices ranging from $0.47
to $0.56 per share. On March 1, 2012, NTWK priced a follow-on offering of its common stock at
$0.40 per share. Nob Hill received an allocation of 44,500 shares in that offering. The difference
between Nob Hill’s proceeds received from the restricted period short sales of NTWK shares and
the price paid for 44,500 shares received in the offering was $3,280. Thus, Nob Hill’s participation
in the 2012 NTWK offering resulted in total profits of $3,280.
9. In total, Nob Hill’s violations of Rule 105 resulted in profits of $95,902.
Violations
10. As a result of the conduct described above, Nob Hill violated Rule 105 of
Regulation M under the Exchange Act.
Nob Hill’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.
Disgorgement and Civil Penalties
12. Respondent has submitted a sworn Statement of Financial Condition dated
July 7, 2014 and other evidence and has asserted its inability to pay disgorgement plus
prejudgment interest or a civil penalty.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent Nob Hill’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Nob Hill 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 shall pay disgorgement of $95,902 and prejudgment interest of
$6,662.62, but that payment of such amount is waived based upon Respondent’s sworn
representations in its Statement of Financial Condition dated July 7, 2014 and other documents
provided to the Commission. Based upon Respondent's sworn representations in its Statement of
Financial Condition dated July 7, 2014 and other documents submitted to the Commission, the
Commission is not imposing a penalty against Respondent.
C. The Division of Enforcement ("Division") may, at any time following the entry of
this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent
provided accurate and complete financial information at the time such representations were made;
and (2) seek an order directing payment of disgorgement, pre-judgment interest and the maximum
penalty allowable under the law. No other issue shall be considered in connection with this
petition other than whether the financial information provided by Respondent was fraudulent,
misleading, inaccurate, or incomplete in any material respect. Respondent may not, by way of
defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of
disgorgement and interest should not be ordered; (3) contest the amount of disgorgement and
interest to be ordered; or (4) assert any defense to liability or remedy, including, but not limited to,
any statute of limitations defense.
By the Commission.
Jill M. Peterson
Assistant Secretary