SECURITIES AND EXCHANGE COMMISSION Washington, D.C. LITIGATION RELEASE NO. 15038 / September 12, 1996 SECURITIES AND EXCHANGE COMMISSION v. TUDOR INVESTMENT CORPORATION, (United States District Court for the District of Columbia) (D.D.C. 96 CV 02119) The Securities and Exchange Commission today announced the filing of a Complaint in the United States District Court for the District of Columbia against Tudor Investment Corporation ("Tudor"). The Commission's Complaint alleges that Tudor violated the short sale rule, which permits short sales only under certain circumstances. Simultaneously with the filing of the action, Tudor consented, without admitting or denying the allegations of the Complaint, to the entry of a final judgment. The proposed Final Judgment requires that Tudor pay $800,000 to the United States as a civil penalty under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990. As part of the settlement of this matter, Tudor simultaneously consented to the issuance by the Commission of an Order requiring Tudor to cease and desist from violations of the short sale rule. In the Matter of Tudor Investment Corporation, Administrative Proceeding File No. 3-9077, (September 12, 1996). The Commission's Complaint alleges that Tudor is the trading advisor for a number of investment funds. The Complaint further alleges that on March 15 and 16, 1994, Tudor sold short over 1,743,500 shares of 27 of the 30 stocks listed on the New York Stock Exchange which comprised the Dow Jones Industrial Average (the "Dow Stocks") in violation of the short sale rule, Section 10(a) of the Exchange Act and Rule 10a-1 thereunder. Rule 10a-1 (the "short sale rule") provides that short sales (i.e., sales of a security that the seller does not own) of exchange-listed securities may be effected only at a price above the price at which the immediately preceding sale was effected ("plus tick"), or at a price equal to the last sale if the last preceding transaction at a different price was a lower price ("zero-plus tick"), when compared to the reported last sale price. The holder of a particular security must aggregate its long and short positions together pursuant to Exchange Act Rule 3b-3 to determine whether it has a net short position in a particular security and therefore is obligated to comply with the short sale rule. The Complaint alleges that on March 15 and 16, 1994, Tudor failed to aggregate its long and short positions in the 27 Dow stocks when such aggregation would have shown that it had a net short position in these stocks, and directed the sales of such securities without regard to compliance with the short sale rule. ==========================================START OF PAGE 2====== As a result, 174 short sale transactions by Tudor on March 15 and 16, 1994 in the 27 Dow stocks with a market value of over $98 million were not effectuated on either a plus tick or a zero-plus tick. These sales were a significant factor in a 16 point drop in the DJIA, which produced an approximate $1.5 million gain for Tudor in its short position. Tudor did not attempt to realize such gain and closed out its short position over a period of several months beginning in May of 1994, ultimately incurring a loss of approximately $3,300,000.