SEC Charges Hong Kong-Based Investment Adviser with Violating Trading Rule

ADMINISTRATIVE PROCEEDING
File No. 3-22156

September 23, 2024 - The Securities and Exchange Commission today announced settled charges against Hong Kong, China-based Centerline Investment Management Limited, an investment adviser, for violating an SEC trading rule when it purchased stock in a public offering of securities for an advisory client after effecting short sales in the same stock for the advisory client during a period of time when the SEC rule prohibited those purchases.

The SEC's order finds that Centerline Investment violated Rule 105 of Regulation M of the Securities Exchange Act of 1934, 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 in the offering, absent an exception.  Rule 105 applies regardless of the trader's intent and is designed to prevent potentially manipulative short selling before the pricing of covered secondary offerings of securities.  The SEC's order finds that Centerline Investment violated Rule 105 by participating in a covered offering of securities, occurring on November 18, 2020, after it had sold short the same securities during the restricted period.

Without admitting or denying the findings in the SEC's order, Centerline Investment agreed to cease and desist from committing or causing violations of Rule 105, and to pay disgorgement of $1,476,907.15, prejudgment interest of $194,119.23, and a civil money penalty of $111,614.

The SEC's investigation was conducted by J. Lauchlan Wash and Amy Gwiazda of the Boston Regional Office with assistance from Wendy Kong of the Office of Investigative and Market Analytics. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.