8.5.2009 The SEC brought an administrative action against TJM Proprietary Trading, LLC (TJM), alleging violations of Regulation SHO in connection with options trading activity that resulted in “naked” short selling. The SEC also charged TJM trader Michael R. Benson with aiding and abetting TJM’s violations of Regulation SHO and charged Benson’s supervisor, John T. Burke, with failing to supervise Benson.
The SEC found that, from January 2007 through July 2007, TJM violated Rule 203(b)(1) of Regulation SHO as a result of Benson improperly utilizing the market-maker locate exception to avoid locating shares prior to effecting short-sale transactions. In willful violation of Rule 203(b)(3) of Regulation SHO, TJM engaged in a series of transactions through Benson’s use of short-term FLEX options that did not satisfy its close-out obligations in Regulation SHO threshold securities that had been allocated to TJM by its clearing firm.
The SEC further found that Burke, TJM’s Chief Operating Officer, failed reasonably to supervise Benson with a view to preventing him from willfully aiding and abetting and causing TJM’s violations of Rules 203(b)(1) and 203(b)(3) of Regulation SHO.
Click http://www.sec.gov/litigation/admin/2009/34-60440.pdf to access the administrative action.