• SEC settled charges against Sourcerock Group, LLC for violating public offering rules, when it purchases stock for advisory clients after short selling the same stock.

Allegations

• Sourcerock purchased stock in a public offering of securities for six advisory clients after selling short the same stock for those clients during an SEC-prohibited period.
• Sourcerock did not qualify for an exception to Rule 105 when it purchased shares for the accounts of the Sourcerock Funds in the Magnolia Oil & Gas Corporation offering.
• Improperly benefited by acquiring Magnolia shares at a discount from the market price
• Violated Rule 105 of Regulation M (17 CFR 241.105), which prohibits short selling of an equity security during restricted period and then purchasing same in the offering.
• Rule 105 applies regardless of the trader's intent and aims to prevent potentially manipulative short selling before pricing of covered secondary offerings of securities.
• Restricted period is five business days before pricing of offered securities or beginning with initial filing of a registration statement or notification on SEA Form 1-A or 1-E.

Enforcement

• Sourcerock agreed to cease/desist from violations of Rule 105, and pay $250k penalty.