In re SUTTONBROOK CAPITAL
summary
SuttonBrook Capital Management LP violated Rule 105 of Regulation M by short-selling 625,000 shares of MGM Mirage during the restricted period before a May 2009 follow-on offering, then purchasing 615,000 shares in the offering to realize $2.64 million in illicit profits, and settled with the SEC via a cease-and-desist order, paying only $70,000 in disgorgement with no civil penalty due to claimed financial hardship.
paragraph
SuttonBrook Capital Management LP, a registered investment adviser, violated Rule 105 of Regulation M by selling short 625,000 shares of MGM Mirage between May 11 and May 13, 2009, during the restricted period, and then purchasing 615,000 shares in MGM’s follow-on offering priced at $7 per share, generating $2,635,642 in illicit profits. The SEC instituted cease-and-desist proceedings, and SuttonBrook consented to the order without admitting or denying the findings. Although the violation was clear and intentional, the SEC waived nearly $3.13 million in disgorgement and prejudgment interest, accepting only a $70,000 payment and imposing no civil penalty based on SuttonBrook’s sworn assertion of financial inability to pay more.
narrative
SuttonBrook Capital Management LP, a New York-based registered investment adviser with $46 million in assets under management at the time of its Form ADV filing, violated Rule 105 of Regulation M by short-selling 625,000 shares of MGM Mirage between May 11 and May 13, 2009, during the restricted period defined as beginning five business days before the offering’s pricing. On May 13, 2009, MGM priced its follow-on offering at $7 per share, and SuttonBrook purchased 615,000 shares from the underwriter, realizing profits of $2,635,642 from the price differential between its short sales and the offering purchase. The SEC instituted cease-and-desist proceedings, and SuttonBrook consented to the order without admitting or denying the findings, except as to jurisdiction. Although the violation was intentional and the profits substantial, the SEC accepted SuttonBrook’s sworn Statement of Financial Condition asserting inability to pay disgorgement or penalties, waiving $3.13 million in disgorgement and prejudgment interest and imposing only a $70,000 payment. No civil penalty was levied, and the order requires SuttonBrook to cease and desist from future Rule 105 violations. The SEC reserved the right to reopen the case if SuttonBrook’s financial disclosures are later found to be fraudulent, misleading, or incomplete, and barred SuttonBrook from contesting the findings in any such subsequent proceedings.
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
Suttonbrook Capital Management LP
Keywords
commissionrespondentsuttonbrooksecurities exchangeexchangeordersecuritiesrestricted periodofferingproceedingssuttonbrook capitalexchange commissionshortwhichperiod
Extracted insights
Dollar amounts 4
- $46.00M $46 million $10M–$100M
- $2.64M $2,635,642 $1M–$10M
- $497K $496,539 $100K–$1M
- $70K $70,000 $10K–$100K
Entities 1
- company Suttonbrook Capital Management LP
Triples 7
- Suttonbrook Capital Management Lp Violated Rule 105 Of Regulation M Of The Exchange Act
- Suttonbrook Capital Management Lp Bought Offering Shares From An Underwriter Or Broker Or Dealer Participating In A Follow-On Public Offering
- Suttonbrook Capital Management Lp Sold Short The Same Security During The Restricted Period
- Suttonbrook Capital Management Lp Generated Profits Of $2,635,642
- Suttonbrook Capital Management Lp Is A Limited Partnership Organized Under The Laws Of Delaware
- Suttonbrook Capital Management Lp Had Assets Under Management Of Approximately $46 Million
- Rule 105 Prohibits Purchase Of Equity Securities In Certain Public Offerings From An Underwriter, Broker, Or Dealer Participating In The Offering
Text layers
Extracted body text (9,507c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73110 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16114
In the Matter of
SUTTONBROOK CAPITAL
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
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 SuttonBrook Capital Management LP
(“SuttonBrook” 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 SuttonBrook, which, at the time of the violations, was 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 May 2009, SuttonBrook 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 $2,635,642.
Respondent
3. SuttonBrook Capital Management LP is a limited partnership organized under the
laws of Delaware with its principal place of business in New York, New York. SuttonBrook,
which is currently winding down, was a registered investment adviser at the time of the
violations and had approximately $46 million in assets under management when it filed its most
recent Form ADV with the Commission on March 14, 2013.
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.
SuttonBrook’s Violation of Rule 105 of Regulation M
6. From May 11, 2009 through May 13, 2009, SuttonBrook sold short 625,000 shares
of MGM Mirage (“MGM”) during the restricted period at prices ranging from $10.02 to $13.70
per share. On May 13, 2009, MGM priced a follow-on offering of its common stock at $7 per
share. SuttonBrook received an allocation of 615,000 shares in that offering. The difference
between SuttonBrook’s proceeds received from the restricted period short sales of MGM shares
and the price paid for 615,000 shares received in the offering was $2,635,642. Thus,
SuttonBrook’s participation in the 2009 MGM offering resulted in total profits of $2,635,642.
Violations
7. As a result of the conduct described above, SuttonBrook violated Rule 105 of
Regulation M under the Exchange Act.
SuttonBrook’s 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.
Disgorgement and Civil Penalties
9. Respondent has submitted a sworn Statement of Financial Condition dated July 9,
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 SuttonBrook’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent SuttonBrook 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 $2,635,642, which represents profits gained
as a result of the conduct described herein, and prejudgment interest of $496,539.35, but that
payment of such amount except $70,000 is waived based upon Respondent’s sworn representations
in its Statement of Financial Condition dated July 9, 2014 and other documents provided to the
Commission. Based upon Respondent's sworn representations in its Statement of Financial
Condition dated July 9, 2014 and other documents submitted to the Commission, the Commission
is not imposing a penalty against Respondent. The payment required by this Order shall be made
to the Securities and Exchange Commission. If timely payment is not made, additional interest
shall accrue pursuant to SEC Rule of Practice 600. Payment 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) 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
SuttonBrook 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 St., NE,
Washington, DC 20549.
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 (8,983c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 73110 / September 16, 2014
ADMINISTRATIVE PROCEEDING
File No. 3-16114
In the Matter of
SUTTONBROOK CAPITAL
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
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 SuttonBrook Capital Management LP
(“SuttonBrook” 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 a violation of Rule 105 of Regulation M of the
Exchange Act by SuttonBrook, which, at the time of the violations, was 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 May 2009, SuttonBrook 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 $2,635,642.
Respondent
3. SuttonBrook Capital Management LP is a limited partnership organized under the
laws of Delaware with its principal place of business in New York, New York. SuttonBrook,
which is currently winding down, was a registered investment adviser at the time of the
violations and had approximately $46 million in assets under management when it filed its most
recent Form ADV with the Commission on March 14, 2013.
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.
SuttonBrook’s Violation of Rule 105 of Regulation M
6. From May 11, 2009 through May 13, 2009, SuttonBrook sold short 625,000 shares
of MGM Mirage (“MGM”) during the restricted period at prices ranging from $10.02 to $13.70
per share. On May 13, 2009, MGM priced a follow-on offering of its common stock at $7 per
share. SuttonBrook received an allocation of 615,000 shares in that offering. The difference
between SuttonBrook’s proceeds received from the restricted period short sales of MGM shares
and the price paid for 615,000 shares received in the offering was $2,635,642. Thus,
SuttonBrook’s participation in the 2009 MGM offering resulted in total profits of $2,635,642.
Violations
7. As a result of the conduct described above, SuttonBrook violated Rule 105 of
Regulation M under the Exchange Act.
SuttonBrook’s 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.
Disgorgement and Civil Penalties
9. Respondent has submitted a sworn Statement of Financial Condition dated July 9,
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 SuttonBrook’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent SuttonBrook 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 $2,635,642, which represents profits gained
as a result of the conduct described herein, and prejudgment interest of $496,539.35, but that
payment of such amount except $70,000 is waived based upon Respondent’s sworn representations
in its Statement of Financial Condition dated July 9, 2014 and other documents provided to the
Commission. Based upon Respondent's sworn representations in its Statement of Financial
Condition dated July 9, 2014 and other documents submitted to the Commission, the Commission
is not imposing a penalty against Respondent. The payment required by this Order shall be made
to the Securities and Exchange Commission. If timely payment is not made, additional interest
shall accrue pursuant to SEC Rule of Practice 600. Payment 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) 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
SuttonBrook 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 St., NE,
Washington, DC 20549.
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