Broker-Dealer Settles NYSE Arca Charges for Over-Tendering Shares in Partial Tender Offer

A broker-dealer settled NYSE Arca charges for over-tendering shares in a partial tender offer by failing to accurately calculate its net long position.

In the AWC, NYSE Arca found that during a 2022 modified Dutch auction-style partial tender offer, the firm and an affiliate tendered 150,000 shares of the subject security. NYSE Arca found that the firm failed to accurately calculate its net long position because it did not account for 1,000 short call options (equivalent to 100,000 shares) held in its proprietary account on the expiration date. Because the options had an exercise price below the highest specified tender offer price, the firm was required to reduce its long position by those short options. By failing to do so, the firm over-tendered 100,000 shares, according to the AWC.

The firm consented to findings that it violated Exchange Act Rule 14e-4 ("Prohibited transactions in connection with partial tender offers").

NYSE Arca also found that the firm's written supervisory procedures did not explain how to account for standardized short call options with an exercise price above the final tender price but below the highest specified tender offer price in modified Dutch auction partial tender offers. As a result, NYSE Arca found that the firm failed to provide reasonable guidance to its personnel.

The firm consented to findings that it violated NYSE Arca Rule 11.18 ("Supervision") for failing to maintain a reasonable supervisory system and written procedures.

The firm agreed to a censure and a $40,000 fine. NYSE Arca resolved the matter simultaneously with a parallel FINRA action, bringing the total fine to $80,000.