On September 17, 2013, the SEC's Office of Compliance
Inspections and Examinations (OCIE) issued a risk alert related to Rule 105 of Regulation
M, which governs short selling prior to the pricing of certain
offerings. This risk alert was issued the same day the SEC announced enforcement actions against 23
firms for violations of Rule 105. In the risk alert, the staffs of
OCIE and other SEC Divisions provide guidance to the securities
industry on compliance with Rule 105 based on their observations
from related SEC enforcement actions and examinations conducted
through OCIE's National Exam Program (NEP).
A goal of Rule 105 of Regulation M is to deter the manipulation
of market prices through short selling. Rule 105 makes it unlawful
for a person to purchase securities in a firm commitment equity
offering from an underwriter or broker-dealer participating in the
offering if, during a restricted period (typically the period
beginning five days before the pricing of the
