The SEC has already moved into action on their new regulations by pressing charges against two options traders and their broker-dealers for violating the locate and close-out requirements of Regulation SHO. The Commission also charged a supervisor at one of the firms.
Recipients of the charges included New York City-based Hazan Capital Management LLC (HCM) and its principal trader and majority owner, Steven M. Hazan, with Regulation SHO violations. Chicago-based TJM Proprietary Trading LLC and one of its traders, Michael R. Benson, were also charged with Regulation SHO violations. TJM's chief operating officer John T. Burke was charged for failing to supervise Benson. The firms and individuals agreed to settle the SEC's charges without admitting or denying the findings.
In a press release issued today, the SEC alleges that the traders and their firms improperly claimed that they were entitled to an exception to the locate requirement, and engaged in transactions that created the appearance that they were complying with the close-out requirement. In fact, they were not entitled to the exception and were not complying with the close-out requirement.
While this event shows that perhaps the SEC is taking on a more active role in enforcement, it also shows that violators can settle the matter in short order. Either the SEC is the fastest government agency in existence or they simply wanted to gain some press and went after a small fish. The new regulations are helpful, but are far from bullet proof and this news still has not hit the headlines of mainstream media.