Weiss Asset Management Fined $6.9 Million for Short Selling Violations, SEC Says

The US Securities and Exchange Commission (SEC) has settled charge against the investment advisory firm Weiss Asset Management LP for payout of approximately $6.9 million fine.

According to the announcement, Weiss Asset Management violated the federal securities laws when it unlawfully purchased stock in seven public offerings after selling short those same stocks.

The SEC's order finds that, on seven occasions between December 2020 and February 2021, Weiss Asset Management violated Rule 105, which prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security through the offering, absent an exception.

According to the order, Weiss Asset Management's violations occurred because it repeatedly miscalculated the restricted period and dismissed a number of red flags raised by its internal controls that suggested possible violations of Rule 105.

The order finds that Weiss Asset Management improperly benefited by participating in offerings covered by Rule 105, resulting in ill-gotten gains totaling over $6.5 million. The order also highlights the significant remedial efforts undertaken by Weiss Asset Management and the cooperation it provided in the investigation, including self-reporting the violations to the staff after conducting a review of its trading records, segregating the ill-gotten profits, and updating and revising its compliance and training efforts.

Weiss Asset Management has agreed to disgorge profits of $6,508,793 and to pay interest of $190,211 and a penalty of $200,000.