SEC Charges Investment Adviser and Associated Individuals with Causing Violations of Regulation SHO
Washington D.C., Aug. 17, 2021 —
The Securities and Exchange Commission today announced settled charges against Murchinson Ltd.; its principal, Marc Bistricer; and its trader, Paul Zogala (the respondents), for providing erroneous order-marking information that caused executing brokers to violate Regulation SHO. In addition, Murchinson and Bistricer settled charges for causing a dealer to fail to register with the SEC.
According to the SEC’s order, from June 2016 through October 2017, the respondents provided erroneous order-marking information on hundreds of sale orders of their hedge fund client to the hedge fund’s brokers, causing those brokers to mismark the hedge funds’ sales as “long.” The order finds that in providing the inaccurate information, the respondents also caused the hedge fund’s brokers to fail to borrow or locate shares prior to executing the sales. The order further finds that Murchinson and Bistricer caused the hedge fund to engage in dealer activity without registering with the SEC or being exempt from registration.
“The SEC’s order finds that Murchison, its principal, and its trader caused broker-dealers to violate Regulation SHO,” said Jennifer S. Leete, Associate Director of the SEC Enforcement Division. “Regulation SHO protects our markets against uncovered short sales and other problematic trading practices, so it is important to hold accountable market participants who cause violations of its critical requirements.”
The SEC’s order finds that the respondents caused the hedge fund’s executing brokers to violate the order-marking and locate requirements of Regulation SHO, and that Murchinson and Bistricer caused the hedge fund to violate the dealer registration requirements of the Securities Exchange Act of 1934. Without admitting or denying the findings, the respondents each agreed to cease-and-desist orders. In addition, Murchinson and Bistricer agreed to pay, jointly and severally, disgorgement of $7,000,000, with prejudgment interest of $1,078,183. Murchinson, Bistricer, and Zogala also agreed to pay penalties of $800,000, $75,000, and $25,000, respectively. Finally, Murchinson and Bistricer agreed to certain undertakings to ensure future compliance with Regulation SHO.
The SEC’s investigation was led by Michael Brennan and Emily Shea, with assistance from Sarah Heaton Concannon and Fred Block, and was supervised by Kevin Guerrero and Ms. Leete. Market Specialists Leigh Barrett, Kevin Gershfeld, and Brian Shute of the SEC Enforcement Division’s Office of Investigative and Market Analytics also provided assistance. The SEC appreciates the assistance of the British Virgin Islands Financial Services Commission, the Hellenic Republic Capital Markets Commission, the Central Bank of Ireland, the Jersey Financial Services Commission, the Nova Scotia Securities Commission, and the Ontario Securities Commission.