SEC Charges Investment Advisers with Misleading Disclosures Regarding Work with Activist Short Publishers
ADMINISTRATIVE PROCEEDING
File No. 3-21961
June 11, 2024 - The Securities and Exchange Commission today announced settled charges against Dallas-based registered investment adviser Anson Funds Management, LP and Toronto-based exempt reporting adviser Anson Advisors, Inc. in connection with their work with activist short publishers who issued articles presenting bearish views of target securities.
According to the SEC's order, from at least 2018 through 2023, the private placement memorandum that Anson Funds and Anson Advisors sent to investors for their co-managed flagship fund omitted material information about the fund's short strategy that rendered its statements misleading. The private placement memorandum described the fund's short position investment strategy but omitted that the strategy involved working with activist short publishers who issued articles presenting bearish views of target securities, trading in the target securities around the time the reports were issued, and paying a portion of the fund's trading profits to the short publishers in exchange for the short publishers sharing their work with Anson Funds and Anson Advisors in advance of publication.
In addition, according to the SEC's order, in September and October 2018, Anson Advisors agreed to pay the principal of a short activist firm a share of the fund's trading profits in connection with bearish reports and tweets on two securities. As a result of the fund's trading, the short activist's share of the trading profits exceeded $1.1 million. Instead of paying this amount directly to the short activist, Anson Advisors and Anson Funds paid through a third-party intermediary via invoices for purported research services that the third-party intermediary had not performed.
The SEC's order finds that as a result of this conduct, Anson Advisors willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, and Anson Funds willfully violated Sections 204 and 206(4) of the Advisers Act and Rules 204-2, 206(4)-7, and 206(4)-8 thereunder. Without admitting or denying the findings, Anson Advisors and Anson Funds have agreed to a cease-and-desist order and a censure. Anson Advisors agreed to pay civil money penalties of $1,000,000, and Anson Funds agreed to pay civil money penalties of $1,250,000.
The SEC's investigation was conducted by Wendy E. Pearson and Sarah S. Nilson and supervised by Finola H. Manvelian of the SEC's Los Angeles Regional Office. Trial attorneys Stephen Kam and Ruth Pinkel assisted with the investigation.
Last Reviewed or Updated: July 30, 2024