In re VOLLERO BEACH

 
 
 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70408 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15485 
 
 
In the Matter of 
 
VOLLERO BEACH 
CAPITAL PARTNERS 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 Vollero Beach Capital Partners LLC (“Vollero 
Beach 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 (“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 Vollero Beach Capital, a registered investment adviser and hedge fund manager 
located in New York, New York.  Rule 105 prohibits buying an equity security that is the subject 
of an 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. On two occasions, in October 2009 and October 2010, Vollero Beach 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.  These violations 
collectively resulted in profits of approximately $594,292.  
 
Respondent 
 
 3. Vollero Beach Capital is a limited liability company organized under Delaware law 
and located in New York, New York.  During the relevant period, Vollero Beach Capital managed 
two hedge funds:  Vollero Beach Capital Fund LP and Vollero Beach Capital Offshore Fund Ltd., 
as well as five separately managed accounts.   
 
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 Commission adopted Rule 105 “to foster secondary and follow-on offering 
prices that are determined by independent market dynamics and not by potentially manipulative 
activity.”  Id.  Rule 105 is prophylactic and prohibits the conduct irrespective of the short seller’s 
intent in effecting the short sale.  Id. 
 
                                                 
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 
Vollero Beach Capital’s Violations of Rule 105 of Regulation M 
 
 6. On October 27, 2009, Vollero Beach Capital sold short 26,353 shares of Superior 
Well Services, Inc. (“SWSI”) at prices ranging between $12.16 and $12.53.  On October 28, 2009, 
SWSI announced the pricing of a follow-on offering of 6 million shares of its common stock at 
$10.50 per share.  Vollero Beach Capital received an allocation of 25,000 shares in that offering.  
The difference between Vollero Beach Capital’s proceeds from the restricted period short sales of 
SWSI shares and the price for 25,000 shares purchased in the offering was $46,414.  Thus, Vollero 
Beach Capital’s participation in the SWSI offering resulted in profits of $46,414.     
 
 7. During the period from October 26, 2010 through October 27, 2010, Vollero Beach 
Capital sold short a total of 480,100 shares of Energy XXI (Bermuda) Ltd. (“EXXI”) at prices 
ranging between $22.76 and $23.49.  On October 28, 2010, EXXI announced the pricing of a 
follow-on offering of 12 million shares of its common stock at $20.75 per share.  Vollero Beach 
Capital received an allocation of 254,000 shares in that offering.  The difference between Vollero 
Beach Capital’s proceeds from the restricted period short sales of EXXI shares and the price for the 
254,000 shares purchased in the offering was $547,878.  Thus, Vollero Beach Capital’s 
participation in the EXXI offering resulted in profits of $547,878.     
 
  8. In total, Vollero Beach Capital’s violations of Rule 105 resulted in profits of 
$594,292. 
 
 9. In determining to accept the Offer, the Commission considered Vollero Beach 
Capital’s reliance on counsel for its participation in the EXXI offering.  Prior to its violation in 
connection with that offering, Vollero Beach Capital consulted its then-outside counsel and 
received erroneous advice that Rule 105 did not apply to the type of registration form on which the 
offering was filed with the Commission. 
 
Violations 
 
 10. As a result of the conduct described above, Vollero Beach Capital violated Rule 
105 of Regulation M under the Exchange Act.  
 
Vollero Beach Capital’s Remedial Efforts 
11. In determining to accept the Offer, the Commission considered remedial 
acts promptly undertaken by Respondent and cooperation afforded to Commission staff. 

 4 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Vollero Beach Capital’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Rule 105 of Regulation M of the 
Exchange Act;   
 
 B. Respondent shall, within fourteen (14) days of the entry of this Order, pay 
disgorgement of $594,292, a civil penalty of $214,964 and prejudgment interest of $55,171 to the 
United States Treasury.  If timely payment is not made, additional interest shall accrue pursuant to 
SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717.  Payment 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) 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 
Vollero  Beach 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 Hodgkins, 
Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
Washington, DC 20549.  
 
 By the Commission. 
 
 
 
       Elizabeth M. Murphy 
       Secretary 
                                                 
2
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to option (2) or (3) above. 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70408 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15485 

 

 

In the Matter of 

 

VOLLERO BEACH 

CAPITAL PARTNERS 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 Vollero Beach Capital Partners LLC (“Vollero 

Beach 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 (“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 Vollero Beach Capital, a registered investment adviser and hedge fund manager 

located in New York, New York.  Rule 105 prohibits buying an equity security that is the subject 

of an 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. On two occasions, in October 2009 and October 2010, Vollero Beach 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.  These violations 

collectively resulted in profits of approximately $594,292.  

 

Respondent 

 

 3. Vollero Beach Capital is a limited liability company organized under Delaware law 

and located in New York, New York.  During the relevant period, Vollero Beach Capital managed 

two hedge funds:  Vollero Beach Capital Fund LP and Vollero Beach Capital Offshore Fund Ltd., 

as well as five separately managed accounts.   

 

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 Commission adopted Rule 105 “to foster secondary and follow-on offering 

prices that are determined by independent market dynamics and not by potentially manipulative 

activity.”  Id.  Rule 105 is prophylactic and prohibits the conduct irrespective of the short seller’s 

intent in effecting the short sale.  Id. 

 

                                                 
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 

Vollero Beach Capital’s Violations of Rule 105 of Regulation M 

 

 6. On October 27, 2009, Vollero Beach Capital sold short 26,353 shares of Superior 

Well Services, Inc. (“SWSI”) at prices ranging between $12.16 and $12.53.  On October 28, 2009, 

SWSI announced the pricing of a follow-on offering of 6 million shares of its common stock at 

$10.50 per share.  Vollero Beach Capital received an allocation of 25,000 shares in that offering.  

The difference between Vollero Beach Capital’s proceeds from the restricted period short sales of 

SWSI shares and the price for 25,000 shares purchased in the offering was $46,414.  Thus, Vollero 

Beach Capital’s participation in the SWSI offering resulted in profits of $46,414.     

 

 7. During the period from October 26, 2010 through October 27, 2010, Vollero Beach 

Capital sold short a total of 480,100 shares of Energy XXI (Bermuda) Ltd. (“EXXI”) at prices 

ranging between $22.76 and $23.49.  On October 28, 2010, EXXI announced the pricing of a 

follow-on offering of 12 million shares of its common stock at $20.75 per share.  Vollero Beach 

Capital received an allocation of 254,000 shares in that offering.  The difference between Vollero 

Beach Capital’s proceeds from the restricted period short sales of EXXI shares and the price for the 

254,000 shares purchased in the offering was $547,878.  Thus, Vollero Beach Capital’s 

participation in the EXXI offering resulted in profits of $547,878.     

 

  8. In total, Vollero Beach Capital’s violations of Rule 105 resulted in profits of 

$594,292. 

 

 9. In determining to accept the Offer, the Commission considered Vollero Beach 

Capital’s reliance on counsel for its participation in the EXXI offering.  Prior to its violation in 

connection with that offering, Vollero Beach Capital consulted its then-outside counsel and 

received erroneous advice that Rule 105 did not apply to the type of registration form on which the 

offering was filed with the Commission. 

 

Violations 

 

 10. As a result of the conduct described above, Vollero Beach Capital violated Rule 

105 of Regulation M under the Exchange Act.  

 

Vollero Beach Capital’s Remedial Efforts 

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

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



 4 

IV. 

 

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

agreed to in Respondent Vollero Beach Capital’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 

committing or causing any violations and any future violations of Rule 105 of Regulation M of the 

Exchange Act;   

 

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

disgorgement of $594,292, a civil penalty of $214,964 and prejudgment interest of $55,171 to the 

United States Treasury.  If timely payment is not made, additional interest shall accrue pursuant to 

SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717.  Payment 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) 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 

Vollero Beach 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 Hodgkins, 

Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 

Washington, DC 20549.  

 

 By the Commission. 

 

 

 

       Elizabeth M. Murphy 

       Secretary 

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

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