SEC Files Settled Complaint Against Candlestick Capital Management LP for Violating Rule 105 in Stock Purchase

The Securities and Exchange Commission has filed a formal complaint against Candlestick Capital Management LP, claiming that it violated an SEC rule. Candlestick Capital Management LP is accused of violating an SEC rule by purchasing stock in a publicly offered offering on behalf of two private fund clients. Candlestick Capital had previously sold short the stock for these clients. This was against the SEC Rule. The two private fund clients, Candlestick Master Fund LP and Candlestick US F&F Fund LP, have also been named as relief defendants in the complaint.

Candlestick Capital agreed to pay $810,000 as part of a settlement. In addition, two clients of private funds have agreed to return the profits that they made from Candlestick Capital’s illegal trading. This totals approximately $1.6million plus prejudgment interests. Court approval is required for the settlement.

The SEC filed a complaint over a violation of Rule 105. Rule 105 prohibits the short sale of equity securities during a restricted time period, and then the purchase of the same security through a public offering unless an exemption applies. The Rule was designed to prevent short-selling that could be used as a manipulative tactic before covered offerings.

Candlestick Capital violated Rule105, but did not report it to the Commission or conduct a formal analysis of its trading records. In 2021, the violation was only discovered during a routine inspection by Commission staff. Candlestick Capital, Inc. has since taken corrective measures including revising their Rule 105 policies.

Candlestick Capital was charged in the SEC complaint with violating Rule 105 of Regulation M of Securities Exchange Act of 1935. Candlestick Capital consented to a final judgement ordering it to pay an $810,000 penalty, without admitting to or denying allegations made in the complaint. Candlestick Master Fund and Candlestick US F&F Fund have also agreed to the entry of final judgments, with Candlestick Master Fund being ordered to disgorge profits of $1,565,305 and pay interest of $89,439, and Candlestick US F&F Fund being ordered to pay disgorgement of $55,092 and pay interest of $3,147. Candlestick Capital also agreed to a similar order in SEC proceedings acknowledging that Rule 105 was violated and agreeing not to commit future violations.

Anne Hancock of SEC’s Boston Regional Office, Dawn Edick of SEC’s Office of Investigative and Market Analytics, and Amy Gwiazda of SEC’s Boston Regional Office led the investigation with Wendy Kong of SEC’s Office of Investigative and Market Analytics.

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SEC: What You Need to Know

Securities and Exchange Commission is an American regulatory agency that supervises and enforces federal security laws. The SEC’s main goal is to protect investors and maintain fair, efficient, and transparent markets.

The SEC has the responsibility of regulating and overseeing various participants within the securities industry. This includes securities exchanges as well as brokers, dealers, advisors to investors, and mutual fund companies. The SEC ensures that all securities industry participants comply with the laws and regulations and provide transparency and fair treatment to investors.

SEC plays an important role in the enforcement of securities laws. It does this by investigating possible violations, taking action against those who violated securities laws, and imposing sanctions or penalties. Its goal is to stop fraud, manipulation, or other illegal activity in the financial market, thus promoting investor trust.

The SEC encourages disclosure and transparency through its requirement that public companies give accurate and timely data to investors. The SEC approves and reviews the registration statements and periodic reporting filed by these public companies. This ensures that investors are able to make informed investment decisions.

The SEC has a mission to promote fair and efficient markets. It also protects investors from fraud and helps to facilitate capital formation for economic growth.

More information can be found at

SEC’s Website

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