In re TALKOT CAPITAL LLC

 
 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70406 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15484 
 
 
In the Matter of 
 
TALKOT CAPITAL LLC,  
 
Respondent. 
 
 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER AND CIVIL 
PENALTY 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against Talkot Capital LLC (“Talkot Capital” or 
“Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings  
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   
 
 
 
 
 

 2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
Summary 
 
1. These proceedings arise out of violations of Rule 105 of Regulation M of the 
Exchange Act by Talkot Capital, a California-based registered investment adviser.  Rule 105 
prohibits buying an equity security made available through a public offering, conducted on a firm 
commitment basis, from an underwriter or broker or dealer participating in the offering after 
having sold short the same security during the restricted period as defined therein. 
 
 2. In June 2010, Talkot Capital bought offered shares from an underwriter or broker or 
dealer participating in a follow-on public offering after having sold short the same security during 
the restricted period.  This violation resulted in profits of $17,640.  
 
Respondent 
 
 3. Talkot Capital LLC is a California limited liability company with its principal place of 
business in Sausalito, California.  Talkot Capital LLC has been registered with the Commission as an 
investment adviser since July 11, 2013 and provides advisory services to two domestic funds and two 
offshore funds with total assets under management in excess of $162 million. 
 
Legal Framework 
 
4. Rule 105 makes it unlawful for a person to purchase equity securities from an 
underwriter, broker, or dealer participating in a public offering if that person sold short the security 
that is the subject of the offering during the restricted period defined in the rule, absent an exception.  
17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. No. 34-56206, 72 
Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 restricted period is the 
shorter of the period:  (1) beginning five business days before the pricing of the offered securities and 
ending with such pricing; or (2) beginning with the initial filing of a registration statement or 
notification on Exchange Act Form 1-A or Form 1-E and ending with pricing.   
 
5. “The goal of Rule 105 is to promote offering prices that are based upon open market 
prices determined by supply and demand rather than artificial forces.”  Final Rule: Short Sales, 
Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct irrespective of 
the short seller’s intent in effecting the short sale. 
  
 
 
 
                                                 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 
or entity in this or any other proceeding. 
 

 3 
Talkot Capital’s Violation of Rule 105 of Regulation M 
 
 6. On June 24, 2010, Talkot Capital sold short 50,000 shares of Cypress Sharpridge 
Investments Inc. (“CYS”) during the restricted period at an average price of $12.7320 per share.  
On June 24, 2010, CYS announced the pricing of a follow-on offering of its common stock at 
$12.50 per share.  Talkot Capital received an allocation of 250,000 shares in that offering.  The 
difference between Talkot Capital’s proceeds from the restricted period short sales of CYS shares 
and the price paid for the 50,000 shares received in the offering was $11,600.  Respondent also 
improperly obtained a benefit of $6,040 by purchasing the remaining 200,000 shares at a discount 
from CYS’s market price.  Thus, Talkot Capital’s participation in the CYS offering netted total 
profits of $17,640.   
  
  7. In total, Talkot Capital’s violation of Rule 105 resulted in profits of $17,640. 
 
Violations 
 
 8. As a result of the conduct described above, Talkot Capital violated Rule 105 of 
Regulation M under the Exchange Act.  
 
Talkot Capital’s Remedial Efforts 
9. In determining to accept the Offer, the Commission considered remedial 
acts promptly undertaken by Respondent and cooperation afforded to Commission staff. 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Talkot Capital’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent Talkot Capital cease and 
desist from committing or causing any violations and any future violations of Rule 105 of 
Regulation M of the Exchange Act;   
 
 B. Talkot Capital shall within fourteen (14) days of the entry of this Order, pay 
disgorgement of $17,640, prejudgment interest of $1,897.68, and a civil money penalty in the 
amount of $65,000 (for a total of $84,537.68) to the United States Treasury.  If timely payment is 
not made, additional interest shall accrue pursuant to SEC Rule of Practice 600.  Payments must be 
made in one of the following ways: 
 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;
2
 
                                                 
2
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to options (2) or (3) above. 

 4 
(2) Respondent may make direct payment from a bank account via Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to: 
 
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK  73169 
 
 Payments  by  check  or  money  order  must  be  accompanied  by a  cover  letter  identifying 
Talkot Capital as  a Respondent in these proceedings, and the file number  of these proceedings; a 
copy of the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate 
Director,  Division  of  Enforcement,  Securities  and  Exchange  Commission, 100  F  Street,  N.E., 
Washington, DC  20549. 
 
 By the Commission. 
 
 
 
       Elizabeth M. Murphy 
       Secretary 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70406 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15484 

 

 

In the Matter of 

 

TALKOT CAPITAL LLC,  

 

Respondent. 

 

 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER AND CIVIL 

PENALTY 

  

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against Talkot Capital LLC (“Talkot Capital” or 

“Respondent”).  

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings  

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 

Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   

 

 

 

 

 



 2 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. These proceedings arise out of violations of Rule 105 of Regulation M of the 

Exchange Act by Talkot Capital, a California-based registered investment adviser.  Rule 105 

prohibits buying an equity security made available through a public offering, conducted on a firm 

commitment basis, from an underwriter or broker or dealer participating in the offering after 

having sold short the same security during the restricted period as defined therein. 

 

 2. In June 2010, Talkot Capital bought offered shares from an underwriter or broker or 

dealer participating in a follow-on public offering after having sold short the same security during 

the restricted period.  This violation resulted in profits of $17,640.  

 

Respondent 

 
 3. Talkot Capital LLC is a California limited liability company with its principal place of 

business in Sausalito, California.  Talkot Capital LLC has been registered with the Commission as an 

investment adviser since July 11, 2013 and provides advisory services to two domestic funds and two 

offshore funds with total assets under management in excess of $162 million. 

 

Legal Framework 

 

4. Rule 105 makes it unlawful for a person to purchase equity securities from an 

underwriter, broker, or dealer participating in a public offering if that person sold short the security 

that is the subject of the offering during the restricted period defined in the rule, absent an exception.  

17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. No. 34-56206, 72 

Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 restricted period is the 

shorter of the period:  (1) beginning five business days before the pricing of the offered securities and 

ending with such pricing; or (2) beginning with the initial filing of a registration statement or 

notification on Exchange Act Form 1-A or Form 1-E and ending with pricing.   

 

5. “The goal of Rule 105 is to promote offering prices that are based upon open market 

prices determined by supply and demand rather than artificial forces.”  Final Rule: Short Sales, 

Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct irrespective of 

the short seller’s intent in effecting the short sale. 

  

 

 

 

                                                 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 

or entity in this or any other proceeding. 

 



 3 

Talkot Capital’s Violation of Rule 105 of Regulation M 

 

 6. On June 24, 2010, Talkot Capital sold short 50,000 shares of Cypress Sharpridge 

Investments Inc. (“CYS”) during the restricted period at an average price of $12.7320 per share.  

On June 24, 2010, CYS announced the pricing of a follow-on offering of its common stock at 

$12.50 per share.  Talkot Capital received an allocation of 250,000 shares in that offering.  The 

difference between Talkot Capital’s proceeds from the restricted period short sales of CYS shares 

and the price paid for the 50,000 shares received in the offering was $11,600.  Respondent also 

improperly obtained a benefit of $6,040 by purchasing the remaining 200,000 shares at a discount 

from CYS’s market price.  Thus, Talkot Capital’s participation in the CYS offering netted total 

profits of $17,640.   

  

  7. In total, Talkot Capital’s violation of Rule 105 resulted in profits of $17,640. 

 

Violations 

 

 8. As a result of the conduct described above, Talkot Capital violated Rule 105 of 

Regulation M under the Exchange Act.  

 

Talkot Capital’s Remedial Efforts 

9. In determining to accept the Offer, the Commission considered remedial 

acts promptly undertaken by Respondent and cooperation afforded to Commission staff. 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Talkot Capital’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent Talkot Capital cease and 

desist from committing or causing any violations and any future violations of Rule 105 of 

Regulation M of the Exchange Act;   

 

 B. Talkot Capital shall within fourteen (14) days of the entry of this Order, pay 

disgorgement of $17,640, prejudgment interest of $1,897.68, and a civil money penalty in the 

amount of $65,000 (for a total of $84,537.68) to the United States Treasury.  If timely payment is 

not made, additional interest shall accrue pursuant to SEC Rule of Practice 600.  Payments must be 

made in one of the following ways: 

 

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request;2 

                                                 
2  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 

threshold, respondents must make payments pursuant to options (2) or (3) above. 



 4 

(2) Respondent may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to: 

 

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK  73169 

 

 Payments by check or money order must be accompanied by a cover letter identifying 

Talkot Capital as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate 

Director, Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., 

Washington, DC  20549. 

 

 By the Commission. 

 

 

 

       Elizabeth M. Murphy 

       Secretary