{"id":826,"date":"2011-02-02T21:11:50","date_gmt":"2011-02-02T21:11:50","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2011\/02\/fontana_capital_llc_founder_vi"},"modified":"2022-03-18T15:08:27","modified_gmt":"2022-03-18T20:08:27","slug":"fontana-capital-llc-founder-vi","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/fontana-capital-llc-founder-vi\/","title":{"rendered":"Fontana Capital LLC Founder Violated Short-Selling Rule, Says SEC"},"content":{"rendered":"<p>The U.S. Securities and Exchange Commission has charged Forrest Fontana with violating Rule 105 of Regulation M and illegally making more than $1 million. The rule prohibits investors from taking part in public offerings when they have shorted the same securities. Fontana, who allegedly violated the rule three times, helped investors make the unlawful profits.<\/p>\n<p>The SEC contends that in 2008, the ex-hedge fund manager and founder of Fontana Capital LLC, allegedly shorted 60,000 shares of XL Capital (now XL Group) and then shorted 40,000 shares of <a href=\"https:\/\/www.investorlawyers.com\/bank-of-america-background-information.html\">Bank of America<\/a>&#8216;s <a href=\"https:\/\/www.investorlawyers.com\/merrill-lynch-background-information.html\">Merrill Lynch <\/a>(BAC). On July 29, 2008, regulators claim that Fontana bought 50,000 shares of XL Capital and 200,000 shares of Merrill Lynch in secondary offerings. He made $149,000 off his XL capital bets and $792,000 from Merrill Lynch. Later that year, he allegedly shorted 100,000 Wells Fargo (WFC) shares. Fontana bought the same amount the next day and made a profit of about $160,000.<\/p>\n<p>Under the 1933 Securities Act, Rule 105 of Regulation M is there to prevent short selling that can decrease proceeds for shareholders and companies by artificially depressing a stock&#8217;s market price right before a company prices its public offering. Rule 105 of Regulation is there to make sure that offering prices are established through the natural forces of supply and demand. Traders must wait five days after shorting a stock before they can take part in that company&#8217;s public offering. This prevents investors from using shorting to lower the price that they will pay later in the offering.<\/p>\n<p>There will be a hearing to determine the veracity of the allegations against Fontana and whether sanctions should be issued.<\/p>\n<p><strong>Related Web Resources: <\/strong><br \/>\n<a href=\"https:\/\/www.boston.com\/business\/articles\/2011\/01\/08\/hedge_fund_manager_faces_sec_allegations\/\">Hedge fund manager faces SEC allegations<\/a>, Boston.com, January 8, 2011<br \/>\n<a href=\"https:\/\/www.sec.gov\/litigation\/admin\/2011\/34-63672.pdf\">Read the SEC&#8217;s administrative order <\/a> (PDF)<br \/>\n <a href=\"https:\/\/www.investorlawyers.com\/blog\/fontana-capital-llc-founder-vi\/#more-826\" class=\"more-link\">Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. Securities and Exchange Commission has charged Forrest Fontana with violating Rule 105 of Regulation M and illegally making more than $1 million. The rule prohibits investors from taking part in public offerings when they have shorted the same securities. Fontana, who allegedly violated the rule three times, helped investors make the unlawful profits. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3752,3748,3973],"tags":[],"class_list":["post-826","post","type-post","status-publish","format-standard","hentry","category-financial-firms","category-hedge-funds","category-short-selling"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Fontana Capital LLC Founder Violated Short-Selling Rule, Says SEC &#8212; Investor Lawyers Blog &#8212; February 2, 2011<\/title>\n<meta name=\"description\" content=\"The U.S. Securities and Exchange Commission has charged Forrest Fontana with violating Rule 105 of Regulation M and illegally making more than $1 million. &#8212; February 2, 2011\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investorlawyers.com\/blog\/fontana-capital-llc-founder-vi\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Fontana Capital LLC Founder Violated Short-Selling Rule, Says SEC &#8212; 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