On May 7, 2015, Ascendiant’s market making desk effected 45 short sales in an equity security, Riviera Tool Co. (RIVT), for its own account, without complying with the locate requirement of Rule 203(b)(1) of Regulation SHO of the Securities Exchange Act of 1934 (Regulation SHO). In each of these 45 instances, the firm erroneously relied upon the bona-fide market making exemption to Rule 203(b)(1) of Regulation SHO, effecting each short sale without (1) borrowing the security, or entering into a bona-fide arrangement to borrow the security; or (2) having reasonable grounds to believe that the security could be borrowed so that it could be delivered on the date delivery was due; and (3) documenting compliance with Rule 203(b)(1) of Regulation SHO. This conduct violated Rule 203(b)(1) of Regulation SHO and FINRA Rule 2010, and generated $26,720 in net profits for the firm and its traders.
The settlement filing is available at https://www.finra.org/sites/default/files/fda_documents/2015045508801%20Ascendiant%20Capital%20Markets%2C%20LLC%20CRD%20152912%20AWC%20DM.pdf