The Financial Industry Regulatory Authority said Wednesday that First New York Securities must pay $916,000 for short selling ahead of 14 public securities offerings.
First New York will pay disgorgement of over $516,000, plus interest, and a fine of $400,000. Additionally, the firm is prohibited from participating in secondary or follow-on offerings for six months.
Part of the Securities Exchange Act of 1934, Rule 105 of Regulation M prohibits the buying of securities in secondary offerings when the purchaser sold short the same security during a restricted period, typically five business days, before the secondary offering is priced.
“Rule 105 of Regulation M is vital to ensuring the integrity and fairness of the offering process,” said Thomas Gira, FINRA’s executive vice president of market regulation, in a statement. “Rule 105 violations, particularly recidivist violations as is the case with First New York, will be aggressively pursued by FINRA.”