In re JGP GLOBAL GESTAO DE

 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70415 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15479 
 
 
In the Matter of 
 
JGP GLOBAL GESTAO DE 
RECURSOS LTDA. 
 
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 JGP Global Gestão de Recursos Ltda. (“JGP” 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 Exchange Act, 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  (“Rule 105”) by JGP, a Brazilian-based  investment adviser.   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  three  occasions  from  September  2009  through October  2011,  JGP  bought 
offered shares for its advised funds 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 $2,537,114. 
 
Respondent 
 
3. JGP is a Brazilian company organized under the laws of Brazil as a Brazilian 
Sociedade Limitada with its principal place of business in Rio de Janeiro, Brazil.  Since July 2012, 
JGP has had exempt adviser reporting status with the Commission under the Investment Advisers 
Act of 1940; it was not registered with the Commission at the time of the violations.  JGP is the 
investment adviser to four offshore funds and has over $1.2 billion in 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 person or 
entity in this or any other proceeding. 

JGP’s Violations of Rule 105 of Regulation M 
 
6. On September 18, 21, and 22, 2009, JGP sold short for its advised funds a total of 
686,300 shares of Cemex, S.A.B. de C.V. Sponsore (“Cemex”) at prices ranging from $13.22 to 
$14.15 per share.  On September 22, 2009, after the market closed, Cemex announced a public 
offering of American depository shares priced at $12.50 per share (the “Cemex Offering”).  JGP 
received an allocation of 1,000,000 shares in that offering.  The difference between the proceeds 
from the short sales of Cemex’s shares during the Rule 105 restricted period and the cost of 
acquiring the shares in the Cemex Offering was $786,521.  In addition, the fund advised by JGP 
improperly obtained a benefit of $187,248 from the remaining 313,700 shares it received in the 
Cemex Offering at a market discount from Cemex’s market price.  Accordingly, the total fund’s 
profit from purchasing securities in the Cemex Offering was $973,769. 
 
7. On December 16, 2009, JGP sold short for its advised funds a total of 850,000 
shares of Citigroup at a price of $3.46 per share.  On December 16, 2009, after the market closed, 
Citigroup announced a public offering of common stock priced at $3.15 per share (the “Citigroup 
Offering”).  JGP received an allocation of 22,500,000 shares in that offering.  The difference 
between the proceeds from the short sales of Citigroup shares during the Rule 105 restricted period 
and the cost of acquiring the shares in the Citigroup Offering was $263,500.  In addition, the funds 
advised by JGP improperly obtained a benefit of $161,265 from the remaining 21,650,000 shares 
they received in the Citigroup Offering at a market discount from Citigroup’s market price.  
Accordingly, the total funds’ profit from purchasing securities in the Citigroup Offering was 
$424,765. 
 
8. On October 17, 18, and 19, 2011, JGP sold short for its advised funds a total of 
721,823 shares of Arcos Dorado Holdings Inc. (“Arcos”) at prices ranging from $22.74 to $24.51 
per share.  On October 19, 2011, after the market closed, Arcos announced a public offering of 
Class A shares priced at $22.00 per share (the “Arcos Offering”).  JGP received an allocation of 
1,000,000 shares in that offering.  The difference between the proceeds from the short sales of 
Arcos’ shares during the Rule 105 restricted period and the cost of acquiring the shares in the 
Arcos Offering was $1,064,393.  In addition, the funds advised by JGP improperly obtained a 
benefit of $74,187 from the remaining 278,167 shares they received in the Arcos Offering at a 
market discount from Arcos’ market price.  Accordingly, the total funds’ profit from purchasing 
securities in the Arcos Offering was $1,138,580. 
 
9. In total, JGP’s violations of Rule 105 resulted in profits of $2,537,114. 
 
Violations 
 
10. As a result of the conduct described above, JGP violated Rule 105 of Regulation M 
under the Exchange Act. 
 
JGP’s Remedial Efforts 
 
11. In determining to accept the Offer, the Commission considered the remedial acts 
promptly undertaken by JGP and cooperation afforded the Commission staff.   

 
 
 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent JGP’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
A. Pursuant to Section 21C of the Exchange Act, Respondent JGP 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 JGP shall cause to pay disgorgement of $2,537,114, prejudgment 
interest of $129,310, and a civil penalty of $514,000 (for a total of $3,180,424) to the Commission 
for transfer to the United States Treasury.  Payment shall be made in the following installments: 
 
1. Respondent JGP shall within ten days of the entry of this Order cause to pay a civil 
money penalty in the amount of $514,000 to the Commission for transfer to the 
United States Treasury.  If timely payment is not made, additional interest shall 
accrue pursuant to 31 U.S.C. § 3717. 
 
2. Respondent JGP shall cause to pay disgorgement of $2,537,114 and prejudgment 
interest of $129,310, for a total of $2,666,424, to the Commission for transfer to the 
United States Treasury.  Payments shall be made in the following installments:   
 
a. $500,000 within 40 days of the entry of this Order; 
b. $500,000 within 70 days of the entry of this Order; 
c. $500,000 within 100 days of the entry of this Order; 
d. $500,000 within 130 days of the entry of this Order; 
e. $500,000 within 160 days of the entry of this Order; 
f. $166,424, plus post-judgment interest on the payments described in 
Sections IV.B.2(a)-(f) pursuant to SEC Rule of Practice 600, within 190 
days of the entry of this Order. 
 
Prior to making the payment described in Section IV.B.2(f), Respondent JGP shall contact the 
Commission staff to ensure the inclusion of post-judgment interest.  If any payment is not made by 
the date the payment is required by Section IV.B .2 of this Order, the entire outstanding balance of 
disgorgement, prejudgment interest, plus any additional interest accrued pursuant to SEC Rule of 
Practice 600, shall be due and payable immediately, without further application.   
 
C. 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
 
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 JGP 
Global Gestão de Recursos Ltda. 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 Julie K. 
Lutz, Acting Regional Director, Division of Enforcement, Securities and Exchange Commission, 
Denver Regional Office, 1801 California St., Suite 1500, Denver, Colorado 80202.   
 
 By the Commission. 
 
 
 
       Elizabeth M. Murphy 
       Secretary 
 
                                                 
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. 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70415 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15479 

 

 

In the Matter of 

 

JGP GLOBAL GESTAO DE 

RECURSOS LTDA. 

 

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 JGP Global Gestão de Recursos Ltda. (“JGP” 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 Exchange Act, 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 (“Rule 105”) by JGP, a Brazilian-based investment adviser.  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 three occasions from September 2009 through October 2011, JGP bought 

offered shares for its advised funds 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 $2,537,114. 

 

Respondent 

 

3. JGP is a Brazilian company organized under the laws of Brazil as a Brazilian 

Sociedade Limitada with its principal place of business in Rio de Janeiro, Brazil.  Since July 2012, 

JGP has had exempt adviser reporting status with the Commission under the Investment Advisers 

Act of 1940; it was not registered with the Commission at the time of the violations.  JGP is the 

investment adviser to four offshore funds and has over $1.2 billion in 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 person or 

entity in this or any other proceeding. 



JGP’s Violations of Rule 105 of Regulation M 

 

6. On September 18, 21, and 22, 2009, JGP sold short for its advised funds a total of 

686,300 shares of Cemex, S.A.B. de C.V. Sponsore (“Cemex”) at prices ranging from $13.22 to 

$14.15 per share.  On September 22, 2009, after the market closed, Cemex announced a public 

offering of American depository shares priced at $12.50 per share (the “Cemex Offering”).  JGP 

received an allocation of 1,000,000 shares in that offering.  The difference between the proceeds 

from the short sales of Cemex’s shares during the Rule 105 restricted period and the cost of 

acquiring the shares in the Cemex Offering was $786,521.  In addition, the fund advised by JGP 

improperly obtained a benefit of $187,248 from the remaining 313,700 shares it received in the 

Cemex Offering at a market discount from Cemex’s market price.  Accordingly, the total fund’s 

profit from purchasing securities in the Cemex Offering was $973,769. 

 

7. On December 16, 2009, JGP sold short for its advised funds a total of 850,000 

shares of Citigroup at a price of $3.46 per share.  On December 16, 2009, after the market closed, 

Citigroup announced a public offering of common stock priced at $3.15 per share (the “Citigroup 

Offering”).  JGP received an allocation of 22,500,000 shares in that offering.  The difference 

between the proceeds from the short sales of Citigroup shares during the Rule 105 restricted period 

and the cost of acquiring the shares in the Citigroup Offering was $263,500.  In addition, the funds 

advised by JGP improperly obtained a benefit of $161,265 from the remaining 21,650,000 shares 

they received in the Citigroup Offering at a market discount from Citigroup’s market price.  

Accordingly, the total funds’ profit from purchasing securities in the Citigroup Offering was 

$424,765. 

 

8. On October 17, 18, and 19, 2011, JGP sold short for its advised funds a total of 

721,823 shares of Arcos Dorado Holdings Inc. (“Arcos”) at prices ranging from $22.74 to $24.51 

per share.  On October 19, 2011, after the market closed, Arcos announced a public offering of 

Class A shares priced at $22.00 per share (the “Arcos Offering”).  JGP received an allocation of 

1,000,000 shares in that offering.  The difference between the proceeds from the short sales of 

Arcos’ shares during the Rule 105 restricted period and the cost of acquiring the shares in the 

Arcos Offering was $1,064,393.  In addition, the funds advised by JGP improperly obtained a 

benefit of $74,187 from the remaining 278,167 shares they received in the Arcos Offering at a 

market discount from Arcos’ market price.  Accordingly, the total funds’ profit from purchasing 

securities in the Arcos Offering was $1,138,580. 

 

9. In total, JGP’s violations of Rule 105 resulted in profits of $2,537,114. 

 

Violations 

 

10. As a result of the conduct described above, JGP violated Rule 105 of Regulation M 

under the Exchange Act. 

 

JGP’s Remedial Efforts 

 

11. In determining to accept the Offer, the Commission considered the remedial acts 

promptly undertaken by JGP and cooperation afforded the Commission staff.   



 

 

 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent JGP’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

A. Pursuant to Section 21C of the Exchange Act, Respondent JGP 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 JGP shall cause to pay disgorgement of $2,537,114, prejudgment 

interest of $129,310, and a civil penalty of $514,000 (for a total of $3,180,424) to the Commission 

for transfer to the United States Treasury.  Payment shall be made in the following installments: 

 

1. Respondent JGP shall within ten days of the entry of this Order cause to pay a civil 

money penalty in the amount of $514,000 to the Commission for transfer to the 

United States Treasury.  If timely payment is not made, additional interest shall 

accrue pursuant to 31 U.S.C. § 3717. 

 

2. Respondent JGP shall cause to pay disgorgement of $2,537,114 and prejudgment 

interest of $129,310, for a total of $2,666,424, to the Commission for transfer to the 

United States Treasury.  Payments shall be made in the following installments:   

 

a. $500,000 within 40 days of the entry of this Order; 

b. $500,000 within 70 days of the entry of this Order; 

c. $500,000 within 100 days of the entry of this Order; 

d. $500,000 within 130 days of the entry of this Order; 

e. $500,000 within 160 days of the entry of this Order; 

f. $166,424, plus post-judgment interest on the payments described in 

Sections IV.B.2(a)-(f) pursuant to SEC Rule of Practice 600, within 190 

days of the entry of this Order. 

 

Prior to making the payment described in Section IV.B.2(f), Respondent JGP shall contact the 

Commission staff to ensure the inclusion of post-judgment interest.  If any payment is not made by 

the date the payment is required by Section IV.B .2 of this Order, the entire outstanding balance of 

disgorgement, prejudgment interest, plus any additional interest accrued pursuant to SEC Rule of 

Practice 600, shall be due and payable immediately, without further application.   

 

C. 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 

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 JGP 

Global Gestão de Recursos Ltda. 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 Julie K. 

Lutz, Acting Regional Director, Division of Enforcement, Securities and Exchange Commission, 

Denver Regional Office, 1801 California St., Suite 1500, Denver, Colorado 80202.   

 

 By the Commission. 

 

 

 

       Elizabeth M. Murphy 

       Secretary 

 

                                                 
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.