Two broker-dealers settled separate SEC charges (see here and here) for tendering a number of shares greater than their net long positions in a partial tender offer for shares of common stock.
According to the SEC, the broker-dealers violated Exchange Act Rule 14e-14 (a/k/a the "short tender rule") by separately tendering 75,000 shares and 50,000 shares in excess of each broker-dealer's net long position. The SEC Order found that, because the partial tender offer was oversubscribed, the broker-dealers caused the company to accept more shares from them and fewer from other participants.
To settle the charges, the broker-dealers agreed to (i) cease and desist from further violating SEC rules, (ii) censures, (iii) disgorgements in the amounts of $223,836 plus interest and $149,224 plus interest, respectively and (iv) civil monetary penalties both in the amount of $50,000.
Commentary
This case stands out. It is unusual to see enforcement actions related to the tender offer rules and or an enforcement action for violating "short tender offer" Rule 14e-14. It appears that, before these cases, the SEC had not brought an action for violating the short tender rule in more than twenty years. It will be interesting to see if these actions are outliers or if this will be a focus of the enforcement staff going forward.
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