First New York Securities to Pay $916K to FINRA for Illegal Short Selling

The Financial Industry Regulatory Authority has sanctioned First New York Securities LLC for short selling prior to participating in 14 public securities offerings. To settle, the firm, which is not denying or admitting to the charges, will pay a $400,000 fine, disgorgement of $516,000 plus interest, and is barred for six months taking part in secondary or follow-on offerings. It also has consented to an entry of the self-regulatory organization’s findings and will modify its supervisory system to make sure it is in compliance.

According to FINRA, from 9/10 through 4/13, First New York sold securities short within the five days going into the pricing of the public offerings in the securities. It would then buy securities in the offerings—purchasing over 670,000 shares after short selling 187,060 securities shares during those five days. The short sales artificially dropped share prices, which let First New York purchase the stocks at a lower cost. The firm bet against shares of companies that included Kinder Morgan Inc. and BlackRock Inc. (BLK).

Under the Securities Exchange Act of 1934’s Rule 105 of Regulation M, brokers are not allowed to buy securities in secondary offerings when during the restricted period prior to the pricing of the secondary offering the buyer sold short the security that is the offering’s subject. Please contact our securities lawyers to request your free case consultation. SSEK Partners Group represents high net worth individual investors and institutional investors who wish to get their securities fraud losses back.

First New York Fined Again by Finra Over Illegal Short Sales, Bloomberg, March 25, 2015

FINRA Sanctions First New York Securities L.L.C. $916,000 for Illegal Short Selling in Advance of 14 Public Offerings, FINRA, March 25, 2015

More Blog Posts:
CBOE Will Pay $6M Penalty Over SEC Charges Alleging Failure to Enforce Trading Rules, Institutional Investor Securities Blog, June 12, 2013

Ponzi Scams: Madoff Victims to Get $93M, Fraud Lawsuits Name Insurance Brokerage Head in $10M Scheme, Stockbroker Fraud Blog, March 24, 2015

Bank of America’s Merrill Lynch to Pay $2.5M to Massachusetts Over Compliance Rule Relapse, Institutional Investor Securities Blog, March 23, 2015