2014-09-16 SEC Press pdf 32 KB 8,016 chars

In re SOLUS ALTERNATIVE

Exhibit of SEC Sanctions 19 Firms and Individual Trader for Short Selling Violations in Advance of Stock Offerings

summary

Solus Alternative Asset Management LP short‑sold J.C. Penney shares during a restricted period, bought shares in the follow‑on offering, profited $39,600, and was ordered by the SEC to cease‑and‑desist, disgorge the profit, pay $895.22 in prejudgment interest and a $65,000 civil penalty.

paragraph

Solus Alternative Asset Management LP, a New York‑based registered investment adviser with over $5 billion in assets, violated Rule 105 of Regulation M by short‑selling 150,000 J.C. Penney shares between September 20‑26, 2013 and then purchasing 50,000 shares in the September 27 follow‑on offering, earning $39,600 in illicit profit. The SEC found the conduct unlawful regardless of intent and entered a cease‑and‑desist order. Solus agreed to disgorge the $39,600, pay $895.22 in prejudgment interest and a $65,000 civil penalty, totaling $105,495.22.

narrative

Solus Alternative Asset Management LP is a Delaware limited partnership operating as a New York‑based registered investment adviser with more than $5 billion in assets under management. In September 2013 the firm short‑sold 150,000 shares of J.C. Penney during the restricted period defined by Rule 105 of Regulation M, then bought 50,000 shares in the company’s follow‑on public offering at $9.65 per share. The price differential generated $39,600 in profit, constituting a violation of Rule 105, which prohibits such short‑sale‑and‑purchase activity regardless of intent. The SEC instituted cease‑and‑desist proceedings, and Solus consented to the settlement without admitting or denying the findings. Under the settlement, Solus must disgorge the $39,600 profit, pay $895.22 in prejudgment interest, and remit a $65,000 civil penalty, for a total of $105,495.22. The order also requires Solus to cease any future violations of Rule 105 and to cooperate with the Commission.

Enriched metadata

Scheme: market-manipulation (100%)
Outcome: settled
Disgorgement: $39,600
Civil penalty: $105,495

Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →

Extracted insights

Dollar amounts 6

$5.00B $5 billion ≥$1B
$1.00M $1,000,000 $1M–$10M
$105K $105,495 $100K–$1M
$65K $65,000 $10K–$100K
$40K $39,600 $10K–$100K
$895 $895.22 <$10K

Entities 2

person investment adviser
agency Securities and Exchange Commission

Triples 10

Solus Alternative Asset Management LP violated Rule 105 of Regulation M of the Securities Exchange Act of 1934
Solus Alternative Asset Management LP sold short equity security during restricted period
Solus Alternative Asset Management LP purchased offering shares from underwriter in September 2013
Solus Alternative Asset Management LP generated $39,600 in profits from violation
Solus Alternative Asset Management LP is organized under laws of Delaware
Solus Alternative Asset Management LP has principal place of business in New York, New York
Solus Alternative Asset Management LP is registered as investment adviser
Solus Alternative Asset Management LP manages over $5 billion in assets under management
SEC instituted cease-and-desist proceedings against Solus Alternative Asset Management LP
SEC issued Release No. 73109 on September 16, 2014

PDF

In re SOLUS ALTERNATIVE · Source

Text layers

Extracted body text (8,016c)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73109 / September 16, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16113

In the Matter of

SOLUS ALTERNATIVE
ASSET MANAGEMENT LP

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

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 Solus Alternative Asset Management LP
(“Solus” 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 a violation of Rule 105 of Regulation M of the
Exchange Act by Solus, a New York, 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. In September 2013, Solus 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. This violation resulted in profits of $39,600.

Respondent

3. Solus Alternative Asset Management LP is a limited partnership organized under
the laws of Delaware with its principal place of business in New York, New York. Solus is a
registered investment adviser with over $5 billion in assets under management.

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.

Solus’ Violation of Rule 105 of Regulation M

6. From September 20, 2013 through September 26, 2013, Solus sold short 150,000
shares of J.C. Penney Company, Inc. (“JCP”) during the restricted period at prices ranging from
$10.44 to $13.25 per share. On September 27, 2013, JCP priced a follow-on offering of its
common stock at $9.65 per share. Solus received an allocation of 50,000 shares in that offering.
The difference between Solus’ proceeds received from the restricted period short sales of JCP
shares and the price paid for the 50,000 shares received in the offering was $39,600. Thus, Solus’
participation in the 2013 JCP offering resulted in total profits of $39,600.

Violations

7. As a result of the conduct described above, Solus violated Rule 105 of Regulation
M under the Exchange Act.

Solus’ Remedial Efforts & Cooperation

8. 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 Solus’ Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent Solus cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;

B. Solus shall within fourteen (14) days of the entry of this Order, pay disgorgement of
$39,600, prejudgment interest of $895.22, and a civil money penalty in the amount of $65,000 (for
a total of $105,495.22) 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
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.

(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
Solus 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 (7,438c · tika · 95% conf)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73109 / September 16, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16113

In the Matter of

SOLUS ALTERNATIVE
ASSET MANAGEMENT LP

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

II.

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 Solus, a New York, 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. In September 2013, Solus 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. This violation resulted in profits of $39,600.

Respondent

Legal Framework

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.

Solus’ Violation of Rule 105 of Regulation M

Violations

7. As a result of the conduct described above, Solus violated Rule 105 of Regulation
M under the Exchange Act.

Solus’ Remedial Efforts & Cooperation

8. 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 Solus’ Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent Solus cease and desist
from committing or causing any violations and any future violations of Rule 105 of Regulation M of
the Exchange Act;

(1) Respondent may transmit payment electronically to the Commission, which will
provide detailed ACH transfer/Fedwire instructions upon request;2

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.

(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

By the Commission.

Jill M. Peterson
Assistant Secretary