The Securities and Exchange Commission announced the filing of a litigated civil action against Lupo Securities, LLC (Lupo), for violating the so-called "short tender rule" and enriching itself at the expense of other participants in a partial tender offer.

According to the SEC's complaint, as part of a 2016 partial tender offer for the common stock of Lockheed Martin Corp., Lupo, then an SEC-registered broker-dealer, tendered more Lockheed shares than it owned on a net basis, in violation of the short tender rule. Because partial tender offers are for less than all of the outstanding shares of a security, if the partial tender offer is oversubscribed, the offeror accepts shares pro rata. Here, Lockheed's partial tender offer was oversubscribed, and the complaint alleges that, by tendering excess Lockheed shares, Lupo received more shares of Leidos Holdings, Inc. - the company acquiring a Lockheed business unit through the tender offer - than it was entitled to, at the expense of other participants who would have received more Leidos shares but for the violation. The complaint alleges that, as a result of this conduct, Lupo received approximately 610,000 more Leidos shares than it would have received had it complied with the short tender rule.

The SEC's complaint, filed in federal district court in Illinois, alleges Lupo violated Rule 14e-4 under the Securities Exchange Act of 1934 and seeks a civil penalty, disgorgement of ill-gotten gains with prejudgment interest, and permanent injunctive relief.

The SEC's investigation was conducted by Peter Fielding with assistance from Stephen Glascoe, and supervised by Stacy Bogert and Jennifer Leete. The litigation will be led by Greg Miller and supervised by Stephan Schlegelmilch.