The United States Securities and Exchange Commission (SEC) and BTIG have reached a settlement in principle but continue discussions over details of the settlement. This becomes clear from a document filed by the SEC in the New York Southern District Court on February 11, 2022.
Let’s recall that in May 2021, the SEC took broker-dealer BTIG, LLC to Court over alleged violations of Regulation SHO. Regulation SHO regulates the short selling of securities and was designed, in part, to restrict naked short selling and to reduce failures to deliver.
According to the status update filed with the Court on February 11, 2022, the parties participated in a settlement conference before Magistrate Judge Cave and reached a settlement in principle, which is subject to approval by the Commissioners of the SEC. The settlement in principle includes an injunction, disgorgement plus prejudgment interest, and a civil money penalty.
BTIG’s counsel has raised the issue of whether the settlement in principle – namely, the injunction – would result in a “bad actor” disqualification under Rule 506(d) of Regulation D under the Securities Act of 1933, see 17 C.F.R. § 230.506(d). The SEC’s counsel confirmed that the injunction would trigger a “bad actor” disqualification unless the SEC grants a waiver of such disqualification.
BTIG’s counsel has submitted a draft waiver request letter to the Division of Corporation Finance. On February 2, 2022, the Division of Corporation Finance provided comments on the draft letter to BTIG’s counsel. On February 9, 2022, BTIG submitted a revised draft waiver request letter to the Division of Corporation Finance for its consideration.
Accordingly, the SEC and BTIG request that the Court adjourn all deadlines in this case for another 60 days – until April 12, 2022 – so that the waiver request process may be completed and the Commissioners of the SEC may consider the settlement in principle.