SEC secures final judgment against Lupo Securities
The Securities and Exchange Commission (SEC) has obtained a final judgment in its case against Lupo Securities LLC.
On December 4, 2023, the Honorable John Robert Blakey of the Illinois Northern District Court signed the final judgment as to Lupo Securities.
The Court ordered that the defendant is permanently restrained and enjoined from violating Rule 14e-4 [17 C.F.R. § 240.14e-4], promulgated under the Securities Exchange Act of 1934 (“Exchange Act”), by acting alone or in concert with others, directly or indirectly, to tender any subject security in a partial tender offer for its own account where its net long position is not equal to or greater than the amount tendered in a subject security or an equivalent security.
The defendant is liable for disgorgement of $420,000, representing net profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $55,000, and a civil penalty in the amount of $75,000 pursuant to Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)].
The judgment brought to an end a lawsuit filed by the SEC in July 2021. The SEC complaint alleged Lupo Securities, LLC violated the so-called “short tender rule” and enriched 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 alleged 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 alleged Lupo violated Rule 14e-4 under the Securities Exchange Act of 1934.