In re Blackthorn Investment
summary
Blackthorn Investment Group, LLC violated Rule 105 of Regulation M by short-selling 16 equity securities during restricted periods before follow-on offerings and then purchasing those same shares at discounted offering prices, generating $270,729 in illicit profits, and agreed to a SEC cease-and-desist order with a $520,207.98 penalty including disgorgement, interest, and a civil fine.
paragraph
Blackthorn Investment Group, LLC, a Kansas-based registered investment adviser, engaged in 16 violations of Rule 105 of Regulation M between June 2009 and May 2011 by short-selling securities such as AGNC and BRE during restricted periods and then purchasing shares in subsequent follow-on offerings at discounted prices, netting $270,729 in illicit profits. The SEC accepted a settlement in which Blackthorn consented to a cease-and-desist order without admitting or denying the findings, agreeing to disgorge $244,378.24 (net of prior payments), pay $15,829.74 in prejudgment interest, and a $260,000 civil penalty, totaling $520,207.98. Rule 105 prohibits such conduct regardless of intent, as it distorts offering prices by artificially linking short sales to discounted public offerings.
narrative
Blackthorn Investment Group, LLC, a Kansas-based registered investment adviser managing over $826 million in assets, violated Rule 105 of Regulation M on sixteen occasions between June 2009 and May 2011 by short-selling equity securities during the restricted period preceding follow-on public offerings and then purchasing those same securities at the discounted offering prices. These violations included trades in AGNC and BRE, with documented profits totaling $270,729, such as $30,652.50 from AGNC in October 2009 and $24,671 from another AGNC offering in September 2010. Rule 105 is a prophylactic rule designed to prevent artificial manipulation of offering prices by prohibiting short sales followed by purchases in the same offering, regardless of intent. Blackthorn consented to a cease-and-desist order without admitting or denying the findings, but acknowledged the SEC’s jurisdiction and the facts as stated. As part of the settlement, Blackthorn agreed to disgorge $244,378.24 (net of prior voluntary payments), pay $15,829.74 in prejudgment interest, and a $260,000 civil penalty, totaling $520,207.98, payable within 14 days. The SEC accepted the settlement, noting Blackthorn’s cooperation and remedial actions during the investigation. The order required immediate cessation of all Rule 105 violations and imposed financial penalties to deter future misconduct in public offerings.
Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →
Statutes
17 C.F.R. § 242.105SECTION 21C OF THE SECURITIES EXCHANGE ACT
Parties
Securities and Exchange CommissionBlackthorn Investment Group, LLC
Keywords
blackthornofferingsharesrestricted periodshortperiodrestrictedsold shortpricereceivedshort salestotal profitspershareblackthorn sold
Extracted insights
Dollar amounts 32
- $826.00M $826 million $100M–$1B
- $1.00M $1,000,000 $1M–$10M
- $520K $520,207 $100K–$1M
- $271K $270,729 $100K–$1M
- $271K $270,729 $100K–$1M
- $260K $260,000 $100K–$1M
- $244K $244,378 $100K–$1M
- $56K $55,712 $10K–$100K
- $31K $30,652 $10K–$100K
- $28K $27,683 $10K–$100K
- $27K $27,205 $10K–$100K
- $26K $26,350 $10K–$100K
Entities 2
- company blackthorn investment group, llc
- agency Securities and Exchange Commission
Triples 9
- Blackthorn Investment Group, LLC violated Rule 105 of Regulation M of the Securities Exchange Act of 1934
- Blackthorn Investment Group, LLC bought offered shares from underwriter or broker or dealer participating in follow-on public offering
- Blackthorn Investment Group, LLC sold short same security during restricted period
- Blackthorn Investment Group, LLC generated profits of $270,729
- Blackthorn Investment Group, LLC is located in Overland Park, Kansas
- Blackthorn Investment Group, LLC manages assets of $826 million
- Blackthorn Investment Group, LLC committed violations on sixteen occasions from June 2009 through May 2011
- SEC instituted cease-and-desist proceedings against Blackthorn Investment Group, LLC
- Rule 105 prohibits purchasing equity securities from underwriter after short selling during restricted period
Text layers
Extracted body text (17,832c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 70392 / September 16, 2013
ADMINISTRATIVE PROCEEDING
File No. 3-15473
In the Matter of
Blackthorn Investment
Group, LLC,
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 Blackthorn Investment Group, LLC.
(“Blackthorn” 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 Blackthorn, a Kansas-based registered investment adviser with the Commission.
Rule 105 prohibits buying an equity security made available through a public offering, conducted
on a firm commitment basis, from an underwriter or broker or dealer participating in the offering
after having sold short the same security during the restricted period as defined therein.
2. On sixteen occasions, from June 2009 through May 2011, Blackthorn bought
offered 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 $270,729.
Respondent
3. Blackthorn Investment Group, LLC is a Kansas limited liability company with its
principal place of business in Overland Park, Kansas. Blackthorn, a registered investment adviser,
manages one domestic fund and one offshore fund and has over $826 million in regulatory assets
under management.
Legal Framework
4. Rule 105 makes it unlawful for a person to purchase equity securities from an
underwriter, broker, or dealer participating in a public 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 Exchange Act Form 1-A or Form 1-E and ending with
pricing.
5. “The goal of Rule 105 is to promote offering prices that are based upon open
market prices determined by supply and demand rather than artificial forces.” Final Rule: Short
Sales, Exchange Act Release No. 50103. Rule 105 is prophylactic and prohibits the conduct
irrespective of the short seller’s intent in effecting the short sale.
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
Blackthorn’s Violations of Rule 105 of Regulation M
6. On October 21, 2009 and October 22, 2009, Blackthorn sold short 15,000 shares of
American Capital Agency Corp. (“AGNC”) during the restricted period at an average price of
$28.6435 per share. On October 26, 2009, AGNC announced the pricing of a follow-on offering
of its common stock at $26.60 per share. Blackthorn received an allocation of 50,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
AGNC shares and the price paid for the 15,000 shares received in the offering was $30,652.50.
Thus, Blackthorn’s participation in the AGNC offering netted total profits of $30,652.50.
7. On September 21, 2010, Blackthorn sold short 5,000 shares of American Capital
Agency Corp. (“AGNC”) during the restricted period at an average price of $29.7002 per share.
On September 28, 2010, AGNC announced the pricing of a follow-on offering of its common
stock at $26.00 per share. Blackthorn received an allocation of 25,000 shares in that offering. The
difference between Blackthorn’s proceeds received from the restricted period short sales of AGNC
shares and the price paid for the 5,000 shares received in the offering was $18,501.00. Respondent
also improperly obtained a benefit of $6,170.00 by purchasing the remaining 20,000 shares at a
discount from AGNC’s market price. Thus, Blackthorn’s participation in the AGNC offering
netted total profits of $24,671.00.
8. On May 3, 2011 and May 4, 2011, Blackthorn sold short 12,640 shares of BRE
Properties Inc. CL A (“BRE”) during the restricted period at an average price of $50.0663 per
share. On May 6, 2011, BRE announced the pricing of a follow-on offering of its common stock at
$48.00 per share. Blackthorn received an allocation of 15,000 shares in that offering. The
difference between Blackthorn’s proceeds received from the restricted period short sales of BRE
shares and the price paid for the 12,640 shares received in the offering was $26,118.03.
Respondent also improperly obtained a benefit of $35.16 by purchasing the remaining 2,360 shares
at a discount from BRE’s market price. Thus, Blackthorn’s participation in the BRE offering
netted total profits of $26,153.19.
9. On November 1, 2010 and November 2, 2010, Blackthorn sold short 12,350 shares
of Chimera Investment Corp. (“CIM”) during the restricted period at an average price of $4.0671
per share. On November 3, 2010, CIM announced the pricing of a follow-on offering of its
common stock at $3.85 per share. Blackthorn received an allocation of 100,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
CIM shares and the price paid for the 12,350 shares received in the offering was $2,681.19.
Respondent also improperly obtained a benefit of $2,200.02 by purchasing the remaining 87,650
shares at a discount from CIM’s market price. Thus, Blackthorn’s participation in the CIM
offering netted total profits of $4,881.21.
10. On November 15, 2010 and November 16, 2010, Blackthorn sold short 25,000
shares of CVR Energy Inc. (“CVI”) during the restricted period at an average price of $11.0838
per share. On November 18, 2010, CVI announced the pricing of a follow-on offering of its
common stock at $10.75 per share. Blackthorn received an allocation of 5,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
4
CVI shares and the price paid for the 5,000 shares received in the offering was $1,669.00. Thus,
Blackthorn’s participation in the CVI offering netted total profits of $1,669.00.
11. On February 2, 2011, Blackthorn sold short 600 shares of CVR Energy Inc.
(“CVI”) during the restricted period at a price of $17.5467 per share. On February 2, 2011, CVI
announced the pricing of a follow-on offering of its common stock at $16.75 per share. Blackthorn
received an allocation of 150,000 shares in that offering. The difference between Blackthorn’s
proceeds received from the restricted period short sales of CVI shares and the price paid for the
600 shares received in the offering was $478.02. Respondent also improperly obtained a benefit of
$27,205.74 by purchasing the remaining 149,400 shares at a discount from CVI’s market price.
Thus, Blackthorn’s participation in the CVI offering netted total profits of $27,683.76.
12. On January 5, 2010, Blackthorn sold short 13,400 shares of Energy Transfer
Partners LP (“ETP”) during the restricted period at a price of $46.3803 per share. On January 6,
2010, ETP announced the pricing of a follow-on offering of its common stock at $44.72 per share.
Blackthorn received an allocation of 11,000 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of ETP shares and the price paid for
the 11,000 shares received in the offering was $18,263.30. Thus, Blackthorn’s participation in the
ETP offering netted total profits of $18,263.30.
13. On January 26, 2011, Blackthorn sold short 15,000 shares of Fifth Street Finance
Corp. (“FSC”) during the restricted period at an average price of $13.2037 per share. On February
1, 2011, FSC announced the pricing of a follow-on offering of its common stock at $12.65 per
share. Blackthorn received an allocation of 4,500 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of FSC shares and the price paid for
the 4,500 shares received in the offering was $2,491.65. Thus, Blackthorn’s participation in the
FSC offering netted total profits of $2,491.65.
14. On March 17, 2010, Blackthorn sold short 10,000 shares of Genpact Ltd. (“G”)
during the restricted period at an average price of $15.4358 per share. On March 18, 2010, G
announced the pricing of a follow-on offering of its common stock at $15.00 per share. Blackthorn
received an allocation of 10,000 shares in that offering. The difference between Blackthorn’s
proceeds from the restricted period short sales of G shares and the price paid for the 10,000 shares
received in the offering was $4,358.00. Thus, Blackthorn’s participation in the G offering netted
total profits of $4,358.00.
15. On March 21, 2011, Blackthorn sold short 30,000 shares of Gulfport Energy Corp.
(“GPOR”) during the restricted period at an average price of $33.4194 per share. On March 25,
2011, GPOR announced the pricing of a follow-on offering of its common stock at $32.00 per
share. Blackthorn received an allocation of 17,000 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of GPOR shares and the price paid for
the 17,000 shares received in the offering was $24,129.80. Thus, Blackthorn’s participation in the
GPOR offering netted total profits of $24,129.80.
5
16. From March 11, 2011 through March 16, 2011, Blackthorn sold short 20,000 shares
of Hatteras Financial Corp. (“HTS”) during the restricted period at an average price of $30.1960
per share. On March 18, 2011, HTS announced the pricing of a follow-on offering of its common
stock at $28.50 per share. Blackthorn received an allocation of 5,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of HTS shares and
the price paid for the 5,000 shares received in the offering was $8,480.00. Thus, Blackthorn’s
participation in the HTS offering netted total profits of $8,480.00.
17. On March 16, 2011, Blackthorn sold short 25,000 shares of Invesco Mortgage
Capital Inc. (“IVR”) during the restricted period at an average price of $23.4785 per share. On
March 22, 2011, IVR announced the pricing of a follow-on offering of its common stock at $21.25
per share. Blackthorn received an allocation of 25,000 shares in that offering. The difference
between Blackthorn’s proceeds from the restricted period short sales of IVR shares and the price
paid for the 25,000 shares received in the offering was $55,712.50. Thus, Blackthorn’s
participation in the IVR offering netted total profits of $55,712.50.
18. On July 12, 2010, Blackthorn sold short 20,000 shares of Annaly Capital
Management Inc. (“NLY”) during the restricted period at an average price of $18.16 per share. On
July 14, 2010, NLY announced the pricing of a follow-on offering of its common stock.
Blackthorn received an allocation of 20,000 shares in that offering at $17.60 per share. The
difference between Blackthorn’s proceeds from the restricted period short sales of NLY shares and
the price paid for the 20,000 shares received in the offering was $11,200.00. Thus, Blackthorn’s
participation in the NLY offering netted total profits of $11,200.00.
19. From June 4, 2009 through June 9, 2009, Blackthorn sold short 171,700 shares of
Stone Energy Corp. (“SGY”) during the restricted period at an average price of $8.6012 per share.
On June 10, 2009, SGY announced the pricing of a follow-on offering of its common stock at
$8.00 per share. Blackthorn received an allocation of 26,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of SGY shares and
the price paid for the 26,000 shares received in the offering was $15,631.20. Thus, Blackthorn’s
participation in the SGY offering netted total profits of $15,631.20.
20. On May 10, 2011, Blackthorn sold short 10,000 shares of Starwood Property Trust
Inc. (“STWD”) during the restricted period at an average price of $22.7394 per share. On May 11,
2011, STWD announced the pricing of a follow-on offering of its common stock at $21.95 per
share. Blackthorn received an allocation of 50,000 shares in that offering. The difference between
Blackthorn’s proceeds received from the restricted period short sales of STWD shares and the
price paid for the 10,000 shares received in the offering was $7,894.00. Thus, Blackthorn’s
participation in the STWD offering netted total profits of $7,894.00.
21. On March 10, 2011, Blackthorn sold short 20,000 shares of Two Harbors
Investment Corp. (“TWO”) during the restricted period at an average price of $10.7972 per share.
On March 10, 2011, TWO announced the pricing of a follow-on offering of its common stock at
$10.25 per share. Blackthorn received an allocation of 15,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of TWO shares and
6
the price paid for the 15,000 shares received in the offering was $6,858.00. Thus, Blackthorn’s
participation in the TWO offering netted total profits of $6,858.00.
22. In total, Blackthorn’s violations of Rule 105 resulted in profits of $270,729
2
.
Violations
23. As a result of the conduct described above, Blackthorn violated Rule 105 of
Regulation M under the Exchange Act.
Blackthorn’s Remedial Efforts
24. 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 Blackthorn’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Blackthorn cease and
desist from committing or causing any violations and any future violations of Rule 105 of
Regulation M of the Exchange Act;
B. Blackthorn shall within fourteen (14) days of the entry of this Order, pay
disgorgement of $244,378.24, prejudgment interest of $15,829.74, and a civil money penalty in the
amount of $260,000.00 (for a total of $520,207.98) to the United States Treasury. If timely
payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600.
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) 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:
2
Although Blackthorn’s total profits were $270,729, Blackthorn previously voluntarily disgorged profits in the
amount of $26,350.76, making Blackthorn’s net ill-gotten gain $244,378.24.
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.
7
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
Blackthorn 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.
Elizabeth M. Murphy
Secretary
OCR text (18,075c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 70392 / September 16, 2013
ADMINISTRATIVE PROCEEDING
File No. 3-15473
In the Matter of
Blackthorn Investment
Group, LLC,
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 Blackthorn Investment Group, LLC.
(“Blackthorn” 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 Blackthorn, a Kansas-based registered investment adviser with the Commission.
Rule 105 prohibits buying an equity security made available through a public offering, conducted
on a firm commitment basis, from an underwriter or broker or dealer participating in the offering
after having sold short the same security during the restricted period as defined therein.
2. On sixteen occasions, from June 2009 through May 2011, Blackthorn bought
offered 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 $270,729.
Respondent
3. Blackthorn Investment Group, LLC is a Kansas limited liability company with its
principal place of business in Overland Park, Kansas. Blackthorn, a registered investment adviser,
manages one domestic fund and one offshore fund and has over $826 million in regulatory assets
under management.
Legal Framework
4. Rule 105 makes it unlawful for a person to purchase equity securities from an
underwriter, broker, or dealer participating in a public 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 Exchange Act Form 1-A or Form 1-E and ending with
pricing.
5. “The goal of Rule 105 is to promote offering prices that are based upon open
market prices determined by supply and demand rather than artificial forces.” Final Rule: Short
Sales, Exchange Act Release No. 50103. Rule 105 is prophylactic and prohibits the conduct
irrespective of the short seller’s intent in effecting the short sale.
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
Blackthorn’s Violations of Rule 105 of Regulation M
6. On October 21, 2009 and October 22, 2009, Blackthorn sold short 15,000 shares of
American Capital Agency Corp. (“AGNC”) during the restricted period at an average price of
$28.6435 per share. On October 26, 2009, AGNC announced the pricing of a follow-on offering
of its common stock at $26.60 per share. Blackthorn received an allocation of 50,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
AGNC shares and the price paid for the 15,000 shares received in the offering was $30,652.50.
Thus, Blackthorn’s participation in the AGNC offering netted total profits of $30,652.50.
7. On September 21, 2010, Blackthorn sold short 5,000 shares of American Capital
Agency Corp. (“AGNC”) during the restricted period at an average price of $29.7002 per share.
On September 28, 2010, AGNC announced the pricing of a follow-on offering of its common
stock at $26.00 per share. Blackthorn received an allocation of 25,000 shares in that offering. The
difference between Blackthorn’s proceeds received from the restricted period short sales of AGNC
shares and the price paid for the 5,000 shares received in the offering was $18,501.00. Respondent
also improperly obtained a benefit of $6,170.00 by purchasing the remaining 20,000 shares at a
discount from AGNC’s market price. Thus, Blackthorn’s participation in the AGNC offering
netted total profits of $24,671.00.
8. On May 3, 2011 and May 4, 2011, Blackthorn sold short 12,640 shares of BRE
Properties Inc. CL A (“BRE”) during the restricted period at an average price of $50.0663 per
share. On May 6, 2011, BRE announced the pricing of a follow-on offering of its common stock at
$48.00 per share. Blackthorn received an allocation of 15,000 shares in that offering. The
difference between Blackthorn’s proceeds received from the restricted period short sales of BRE
shares and the price paid for the 12,640 shares received in the offering was $26,118.03.
Respondent also improperly obtained a benefit of $35.16 by purchasing the remaining 2,360 shares
at a discount from BRE’s market price. Thus, Blackthorn’s participation in the BRE offering
netted total profits of $26,153.19.
9. On November 1, 2010 and November 2, 2010, Blackthorn sold short 12,350 shares
of Chimera Investment Corp. (“CIM”) during the restricted period at an average price of $4.0671
per share. On November 3, 2010, CIM announced the pricing of a follow-on offering of its
common stock at $3.85 per share. Blackthorn received an allocation of 100,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
CIM shares and the price paid for the 12,350 shares received in the offering was $2,681.19.
Respondent also improperly obtained a benefit of $2,200.02 by purchasing the remaining 87,650
shares at a discount from CIM’s market price. Thus, Blackthorn’s participation in the CIM
offering netted total profits of $4,881.21.
10. On November 15, 2010 and November 16, 2010, Blackthorn sold short 25,000
shares of CVR Energy Inc. (“CVI”) during the restricted period at an average price of $11.0838
per share. On November 18, 2010, CVI announced the pricing of a follow-on offering of its
common stock at $10.75 per share. Blackthorn received an allocation of 5,000 shares in that
offering. The difference between Blackthorn’s proceeds from the restricted period short sales of
4
CVI shares and the price paid for the 5,000 shares received in the offering was $1,669.00. Thus,
Blackthorn’s participation in the CVI offering netted total profits of $1,669.00.
11. On February 2, 2011, Blackthorn sold short 600 shares of CVR Energy Inc.
(“CVI”) during the restricted period at a price of $17.5467 per share. On February 2, 2011, CVI
announced the pricing of a follow-on offering of its common stock at $16.75 per share. Blackthorn
received an allocation of 150,000 shares in that offering. The difference between Blackthorn’s
proceeds received from the restricted period short sales of CVI shares and the price paid for the
600 shares received in the offering was $478.02. Respondent also improperly obtained a benefit of
$27,205.74 by purchasing the remaining 149,400 shares at a discount from CVI’s market price.
Thus, Blackthorn’s participation in the CVI offering netted total profits of $27,683.76.
12. On January 5, 2010, Blackthorn sold short 13,400 shares of Energy Transfer
Partners LP (“ETP”) during the restricted period at a price of $46.3803 per share. On January 6,
2010, ETP announced the pricing of a follow-on offering of its common stock at $44.72 per share.
Blackthorn received an allocation of 11,000 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of ETP shares and the price paid for
the 11,000 shares received in the offering was $18,263.30. Thus, Blackthorn’s participation in the
ETP offering netted total profits of $18,263.30.
13. On January 26, 2011, Blackthorn sold short 15,000 shares of Fifth Street Finance
Corp. (“FSC”) during the restricted period at an average price of $13.2037 per share. On February
1, 2011, FSC announced the pricing of a follow-on offering of its common stock at $12.65 per
share. Blackthorn received an allocation of 4,500 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of FSC shares and the price paid for
the 4,500 shares received in the offering was $2,491.65. Thus, Blackthorn’s participation in the
FSC offering netted total profits of $2,491.65.
14. On March 17, 2010, Blackthorn sold short 10,000 shares of Genpact Ltd. (“G”)
during the restricted period at an average price of $15.4358 per share. On March 18, 2010, G
announced the pricing of a follow-on offering of its common stock at $15.00 per share. Blackthorn
received an allocation of 10,000 shares in that offering. The difference between Blackthorn’s
proceeds from the restricted period short sales of G shares and the price paid for the 10,000 shares
received in the offering was $4,358.00. Thus, Blackthorn’s participation in the G offering netted
total profits of $4,358.00.
15. On March 21, 2011, Blackthorn sold short 30,000 shares of Gulfport Energy Corp.
(“GPOR”) during the restricted period at an average price of $33.4194 per share. On March 25,
2011, GPOR announced the pricing of a follow-on offering of its common stock at $32.00 per
share. Blackthorn received an allocation of 17,000 shares in that offering. The difference between
Blackthorn’s proceeds from the restricted period short sales of GPOR shares and the price paid for
the 17,000 shares received in the offering was $24,129.80. Thus, Blackthorn’s participation in the
GPOR offering netted total profits of $24,129.80.
5
16. From March 11, 2011 through March 16, 2011, Blackthorn sold short 20,000 shares
of Hatteras Financial Corp. (“HTS”) during the restricted period at an average price of $30.1960
per share. On March 18, 2011, HTS announced the pricing of a follow-on offering of its common
stock at $28.50 per share. Blackthorn received an allocation of 5,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of HTS shares and
the price paid for the 5,000 shares received in the offering was $8,480.00. Thus, Blackthorn’s
participation in the HTS offering netted total profits of $8,480.00.
17. On March 16, 2011, Blackthorn sold short 25,000 shares of Invesco Mortgage
Capital Inc. (“IVR”) during the restricted period at an average price of $23.4785 per share. On
March 22, 2011, IVR announced the pricing of a follow-on offering of its common stock at $21.25
per share. Blackthorn received an allocation of 25,000 shares in that offering. The difference
between Blackthorn’s proceeds from the restricted period short sales of IVR shares and the price
paid for the 25,000 shares received in the offering was $55,712.50. Thus, Blackthorn’s
participation in the IVR offering netted total profits of $55,712.50.
18. On July 12, 2010, Blackthorn sold short 20,000 shares of Annaly Capital
Management Inc. (“NLY”) during the restricted period at an average price of $18.16 per share. On
July 14, 2010, NLY announced the pricing of a follow-on offering of its common stock.
Blackthorn received an allocation of 20,000 shares in that offering at $17.60 per share. The
difference between Blackthorn’s proceeds from the restricted period short sales of NLY shares and
the price paid for the 20,000 shares received in the offering was $11,200.00. Thus, Blackthorn’s
participation in the NLY offering netted total profits of $11,200.00.
19. From June 4, 2009 through June 9, 2009, Blackthorn sold short 171,700 shares of
Stone Energy Corp. (“SGY”) during the restricted period at an average price of $8.6012 per share.
On June 10, 2009, SGY announced the pricing of a follow-on offering of its common stock at
$8.00 per share. Blackthorn received an allocation of 26,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of SGY shares and
the price paid for the 26,000 shares received in the offering was $15,631.20. Thus, Blackthorn’s
participation in the SGY offering netted total profits of $15,631.20.
20. On May 10, 2011, Blackthorn sold short 10,000 shares of Starwood Property Trust
Inc. (“STWD”) during the restricted period at an average price of $22.7394 per share. On May 11,
2011, STWD announced the pricing of a follow-on offering of its common stock at $21.95 per
share. Blackthorn received an allocation of 50,000 shares in that offering. The difference between
Blackthorn’s proceeds received from the restricted period short sales of STWD shares and the
price paid for the 10,000 shares received in the offering was $7,894.00. Thus, Blackthorn’s
participation in the STWD offering netted total profits of $7,894.00.
21. On March 10, 2011, Blackthorn sold short 20,000 shares of Two Harbors
Investment Corp. (“TWO”) during the restricted period at an average price of $10.7972 per share.
On March 10, 2011, TWO announced the pricing of a follow-on offering of its common stock at
$10.25 per share. Blackthorn received an allocation of 15,000 shares in that offering. The
difference between Blackthorn’s proceeds from the restricted period short sales of TWO shares and
6
the price paid for the 15,000 shares received in the offering was $6,858.00. Thus, Blackthorn’s
participation in the TWO offering netted total profits of $6,858.00.
22. In total, Blackthorn’s violations of Rule 105 resulted in profits of $270,7292.
Violations
23. As a result of the conduct described above, Blackthorn violated Rule 105 of
Regulation M under the Exchange Act.
Blackthorn’s Remedial Efforts
24. 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 Blackthorn’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Blackthorn cease and
desist from committing or causing any violations and any future violations of Rule 105 of
Regulation M of the Exchange Act;
B. Blackthorn shall within fourteen (14) days of the entry of this Order, pay
disgorgement of $244,378.24, prejudgment interest of $15,829.74, and a civil money penalty in the
amount of $260,000.00 (for a total of $520,207.98) to the United States Treasury. If timely
payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600.
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) 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:
2
Although Blackthorn’s total profits were $270,729, Blackthorn previously voluntarily disgorged profits in the
amount of $26,350.76, making Blackthorn’s net ill-gotten gain $244,378.24.
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.
7
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
Blackthorn 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.
Elizabeth M. Murphy
Secretary