• SEC settled with Gates Capital Management, Inc. re Rule 105 short selling violations.
• Bought stock in securities offering for fund clients after shorting same for fund clients.

Alleged Violations

• 30 August through 1 September 2023, Gates Capital sold short 90k ROL shares for fund clients, at $39.76 per share, and 6 September 2023 ROL announced second public offering.
• Second offering was priced at $35 per share on 7 September 2023 prior to market open.
• Restricted period began on 30 August 2023, and because Gates Capital sold short ROL shares during restricted period, was prohibited from purchasing shares unless exempt.
• Gates Capital, on behalf of its fund clients, purchased 100,000 shares in the offering at a price of $35 per share on 7 September 2023, and did not have an exception to do so.
• Gates Capital’s violation of Rule 105 resulted in gains of $432,564 to fund clients.
• Re the above, Gates Capital violated SEA Rule 105 of Regulation M (17 CFR 242.105).
• 17 CFR 242.105(a)(1) and (a)(2) includes a restricted period for offered securities.

Enforcement

• Gates Capital will pay $432,564mn with prejudgment interest of $5,445 which represents period from Gates Capital’s violation to date of Gates Capital’s self-report.
• Also civil money penalty of $57,615, to be paid to the SEC for transfer to US Treasury.