Large Investment Bank Fined $15 Million for Failed Locates and Misleading the SEC Exam Staff
The SEC fined a large investment bank $15 Million for violating Regulations SHO’s locate requirement for short sales and then misleading the SEC examinations staff. The SEC asserts that the respondent over-relied on faulty technology that it knew failed to properly locate a large volume of short sale securities. The SEC criticizes the firm for misleading the OCIE staff with incomplete and unclear responses and misleading responses to cited deficiencies. The SEC suggested that the misleading statements increased the fines imposed: “In determining the appropriate resolution to this matter, the Commission considered, in addition to the underlying conduct, these deficiencies in [respondent’s] responses to OCIE staff.” Andrew M. Calamari, Director of the SEC’s New York Regional Office warned, “[T]here will be consequences, including in the determination of remedies, when a registrant fails to provide complete and clear responses to examination staff.”
OUR TAKE: Don’t play games with the OCIE staff. You can argue a legal point, but you cannot misrepresent facts.