In re WAR CHEST CAPITAL

 
 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70411 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15486 
 
 
In the Matter of 
 
WAR CHEST 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 War Chest Capital Partners LLC (“War Chest” 
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 War Chest, a New York-based private equity firm.  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. On seven occasions, from November 2010 through September 2011, War Chest 
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 $187,036.  
 
Respondent 
 
 3. War Chest Capital Partners LLC is a Delaware limited liability company, which 
was incorporated on March 30, 2009, with its principal place of business in New York, New 
York.  The company provides advisory services to one domestic fund with total assets under 
management of approximately $8,000,000.   It is not a registered investment adviser.   
 
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 
War Chest’s Violations of Rule 105 of Regulation M 
 
 6.  On November 8, 2010, War Chest sold short 11,000 shares of BlackRock Inc. 
(“BLK”) during the restricted period at a price of $169.2811 per share.  On November 8, 2010, 
BLK announced the pricing of a follow-on offering of its common stock at $163.00 per share.  War 
Chest received an allocation of 31,375 shares in that offering.  The difference between War Chest’s 
proceeds received from the restricted period short sales of BLK shares and the price paid for the 
11,000 shares received in the offering was $69,092.11.  Respondent also improperly obtained a 
benefit of $54,849.50 by purchasing the remaining 20,375 shares at a discount from BLK’s market 
price.  Thus, War Chest’s participation in the BLK offering netted total profits of $123,941.60.   
 
 7.  On December 14, 2010, War Chest sold short 15,000 shares of HCP Inc. (“HCP”) 
during the restricted period at an average price of $33.32 per share.  On December 14, 2010, HCP 
announced the pricing of a follow-on offering of its common stock at $32 per share.  War Chest 
received an allocation of 18,600 shares in that offering.  The difference between War Chest’s 
proceeds received from the restricted period short sales of HCP shares and the price paid for the 
15,000 shares received in the offering was $19,800.00.  Respondent also improperly obtained a 
benefit of $6,388.92 by purchasing the remaining 3,600 shares at a discount from HCP’s market 
price.  Thus, War Chest’s participation in the HCP offering netted total profits of $26,188.92.   
 
 8.  On December 15, 2010, War Chest sold short 12,500 shares of Cloud Peak Energy 
Inc. (“CLD”) during the restricted period at an average price of $20.0180 per share.  On December 
15, 2010, CLD announced the pricing of a follow-on offering of its common stock at $19.50 per 
share.  War Chest received an allocation of 16,100 shares in that offering.  The difference between 
War Chest’s proceeds received from the restricted period short sales of CLD shares and the price 
paid for the 12,500 shares received in the offering was $6,475.00.  Respondent also improperly 
obtained a benefit of $1,033.56 by purchasing the remaining 3,600 shares at a discount from 
CLD’s market price.  Thus, War Chest’s participation in the CLD offering netted total profits of 
$7,508.56.     
 
 9. On April 11, 2011, War Chest sold short 5,000 shares of Cobalt International 
Energy Inc. (“CIE”) during the restricted period at a price of $15.04 per share.  On April 11, 2011, 
CIE announced the pricing of a follow-on offering of its common stock at $14 per share.  War 
Chest received an allocation of 20,630 shares in that offering.  The difference between War Chest’s 
proceeds received from the restricted period short sales of CIE shares and the price paid for the 
5,000 shares received in the offering was $5,200.00.  Respondent also improperly obtained a 
benefit of $1,178.50 by purchasing the remaining 15,630 shares at a discount from CIE’s market 
price.  Thus, War Chest’s participation in the CIE offering netted total profits of $6,378.50.    
 
 10. On May 11, 2011, War Chest sold short 7,500 shares of NorthStar Realty Finance 
Co. (“NRF”) during the restricted period at a price of $4.6654 per share.  On May 11, 2011, NRF 
announced the pricing of a follow-on offering of its common stock at $4.25 per share.  War Chest 
received an allocation of 42,880 shares in that offering.  The difference between War Chest’s 
proceeds received from the restricted period short sales of NRF shares and the price paid for the 
7,500 shares received in the offering was $3,115.50.  Respondent also improperly obtained a 

 4 
benefit of $4,355.28 by purchasing the remaining 35,380 shares at a discount from NRF’s market 
price.  Thus, War Chest’s participation in the NRF offering netted total profits of $7,470.78.  
 
 11. On July 14, 2011, War Chest sold short 3,000 shares of Spectrum Brands Holdings 
Inc. (“SPB”) during the restricted period at a price of $28.5760 per share.  On July 15, 2011, SPB 
announced the pricing of a follow-on offering of its common stock at $28.00 per share.  War Chest 
received an allocation of 15,600 shares in that offering.  The difference between War Chest’s 
proceeds from the restricted period short sales of SPB shares and the price paid for the 3,000 shares 
received in the offering was $1,728.00.  Thus, War Chest’s participation in the SPB offering netted 
total profits of $1,728.00.   
 
 12. On September 20, 2011 and September 21, 2011, War Chest sold short 84,370 
shares of NewCastle Investment Corp. (“NCT”) during the restricted period at an average price of 
$4.7138 per share.  On September 21, 2011, NCT announced the pricing of a follow-on offering of 
its common stock at $4.55 per share.  War Chest received an allocation of 176,935 shares in that 
offering.  The difference between War Chest’s proceeds from the restricted period short sales of 
NCT shares and the price paid for the 84,370 shares received in the offering was $13,819.81.  
Thus, War Chest’s participation in the NCT offering netted total profits of $13,819.81.    
    
  13. In total, War Chest’s violations of Rule 105 resulted in profits of $187,036.17. 
 
Violations 
 
 14. As a result of the conduct described above, War Chest violated Rule 105 of 
Regulation M under the Exchange Act.  
 
War Chest’s Remedial Efforts 
15. 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 War Chest’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
A. Pursuant to Section 21C of the Exchange Act, Respondent War Chest cease and 
desist from committing or causing any violations and any future violations of Rule 105 of 
Regulation M of the Exchange Act; 
 
B. War Chest shall pay disgorgement of $187,036.17, prejudgment interest of 
$10,533.18, and a civil money penalty in the amount of $130,000 (for a total of $327,569.35) to 
the United States Treasury.  Payments shall be made in the following installments:   

 5 
 
1. $65,000.35 on the day of entry of this Order; 
2. $65,000 within 90 days of entry of this Order; 
3. $65,000 within 180 days of entry of this Order: 
4. $65,000 within 270 days of entry of this Order 
5. $67,569, plus post-judgment interest on the payments described in Section IV.B.1-4 
pursuant to SEC Rule of Practice 600, within 360 days of entry of this Order. 
 
Prior to making the payment described in Section IV.B.5., Respondent shall contact the 
Commission staff to ensure the inclusion of post-judgment interest. If any payment is not made by 
the date the payment is required by Section IV.B.1-5 of this Order, the entire outstanding balance 
of disgorgement, prejudgment interest, and civil penalties, plus any additional interest accrued 
pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717, shall be due and payable 
immediately, without further application.  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 War 
Chest 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 
 
                                                 
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. 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70411 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15486 

 

 

In the Matter of 

 

WAR CHEST 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 War Chest Capital Partners LLC (“War Chest” 

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 War Chest, a New York-based private equity firm.  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. On seven occasions, from November 2010 through September 2011, War Chest 

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 $187,036.  

 

Respondent 

 

 3. War Chest Capital Partners LLC is a Delaware limited liability company, which 

was incorporated on March 30, 2009, with its principal place of business in New York, New 

York.  The company provides advisory services to one domestic fund with total assets under 

management of approximately $8,000,000.   It is not a registered investment adviser.   

 

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 

War Chest’s Violations of Rule 105 of Regulation M 

 

 6.  On November 8, 2010, War Chest sold short 11,000 shares of BlackRock Inc. 

(“BLK”) during the restricted period at a price of $169.2811 per share.  On November 8, 2010, 

BLK announced the pricing of a follow-on offering of its common stock at $163.00 per share.  War 

Chest received an allocation of 31,375 shares in that offering.  The difference between War Chest’s 

proceeds received from the restricted period short sales of BLK shares and the price paid for the 

11,000 shares received in the offering was $69,092.11.  Respondent also improperly obtained a 

benefit of $54,849.50 by purchasing the remaining 20,375 shares at a discount from BLK’s market 

price.  Thus, War Chest’s participation in the BLK offering netted total profits of $123,941.60.   

 

 7.  On December 14, 2010, War Chest sold short 15,000 shares of HCP Inc. (“HCP”) 

during the restricted period at an average price of $33.32 per share.  On December 14, 2010, HCP 

announced the pricing of a follow-on offering of its common stock at $32 per share.  War Chest 

received an allocation of 18,600 shares in that offering.  The difference between War Chest’s 

proceeds received from the restricted period short sales of HCP shares and the price paid for the 

15,000 shares received in the offering was $19,800.00.  Respondent also improperly obtained a 

benefit of $6,388.92 by purchasing the remaining 3,600 shares at a discount from HCP’s market 

price.  Thus, War Chest’s participation in the HCP offering netted total profits of $26,188.92.   

 

 8.  On December 15, 2010, War Chest sold short 12,500 shares of Cloud Peak Energy 

Inc. (“CLD”) during the restricted period at an average price of $20.0180 per share.  On December 

15, 2010, CLD announced the pricing of a follow-on offering of its common stock at $19.50 per 

share.  War Chest received an allocation of 16,100 shares in that offering.  The difference between 

War Chest’s proceeds received from the restricted period short sales of CLD shares and the price 

paid for the 12,500 shares received in the offering was $6,475.00.  Respondent also improperly 

obtained a benefit of $1,033.56 by purchasing the remaining 3,600 shares at a discount from 

CLD’s market price.  Thus, War Chest’s participation in the CLD offering netted total profits of 

$7,508.56.     

 

 9. On April 11, 2011, War Chest sold short 5,000 shares of Cobalt International 

Energy Inc. (“CIE”) during the restricted period at a price of $15.04 per share.  On April 11, 2011, 

CIE announced the pricing of a follow-on offering of its common stock at $14 per share.  War 

Chest received an allocation of 20,630 shares in that offering.  The difference between War Chest’s 

proceeds received from the restricted period short sales of CIE shares and the price paid for the 

5,000 shares received in the offering was $5,200.00.  Respondent also improperly obtained a 

benefit of $1,178.50 by purchasing the remaining 15,630 shares at a discount from CIE’s market 

price.  Thus, War Chest’s participation in the CIE offering netted total profits of $6,378.50.    

 

 10. On May 11, 2011, War Chest sold short 7,500 shares of NorthStar Realty Finance 

Co. (“NRF”) during the restricted period at a price of $4.6654 per share.  On May 11, 2011, NRF 

announced the pricing of a follow-on offering of its common stock at $4.25 per share.  War Chest 

received an allocation of 42,880 shares in that offering.  The difference between War Chest’s 

proceeds received from the restricted period short sales of NRF shares and the price paid for the 

7,500 shares received in the offering was $3,115.50.  Respondent also improperly obtained a 



 4 

benefit of $4,355.28 by purchasing the remaining 35,380 shares at a discount from NRF’s market 

price.  Thus, War Chest’s participation in the NRF offering netted total profits of $7,470.78.  

 

 11. On July 14, 2011, War Chest sold short 3,000 shares of Spectrum Brands Holdings 

Inc. (“SPB”) during the restricted period at a price of $28.5760 per share.  On July 15, 2011, SPB 

announced the pricing of a follow-on offering of its common stock at $28.00 per share.  War Chest 

received an allocation of 15,600 shares in that offering.  The difference between War Chest’s 

proceeds from the restricted period short sales of SPB shares and the price paid for the 3,000 shares 

received in the offering was $1,728.00.  Thus, War Chest’s participation in the SPB offering netted 

total profits of $1,728.00.   

 

 12. On September 20, 2011 and September 21, 2011, War Chest sold short 84,370 

shares of NewCastle Investment Corp. (“NCT”) during the restricted period at an average price of 

$4.7138 per share.  On September 21, 2011, NCT announced the pricing of a follow-on offering of 

its common stock at $4.55 per share.  War Chest received an allocation of 176,935 shares in that 

offering.  The difference between War Chest’s proceeds from the restricted period short sales of 

NCT shares and the price paid for the 84,370 shares received in the offering was $13,819.81.  

Thus, War Chest’s participation in the NCT offering netted total profits of $13,819.81.    

    

  13. In total, War Chest’s violations of Rule 105 resulted in profits of $187,036.17. 

 

Violations 

 

 14. As a result of the conduct described above, War Chest violated Rule 105 of 

Regulation M under the Exchange Act.  

 

War Chest’s Remedial Efforts 

15. 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 War Chest’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

A. Pursuant to Section 21C of the Exchange Act, Respondent War Chest cease and 

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

Regulation M of the Exchange Act; 

 

B. War Chest shall pay disgorgement of $187,036.17, prejudgment interest of 

$10,533.18, and a civil money penalty in the amount of $130,000 (for a total of $327,569.35) to 

the United States Treasury.  Payments shall be made in the following installments:   



 5 

 

1. $65,000.35 on the day of entry of this Order; 

2. $65,000 within 90 days of entry of this Order; 

3. $65,000 within 180 days of entry of this Order: 

4. $65,000 within 270 days of entry of this Order 

5. $67,569, plus post-judgment interest on the payments described in Section IV.B.1-4 

pursuant to SEC Rule of Practice 600, within 360 days of entry of this Order. 

 

Prior to making the payment described in Section IV.B.5., Respondent shall contact the 

Commission staff to ensure the inclusion of post-judgment interest. If any payment is not made by 

the date the payment is required by Section IV.B.1-5 of this Order, the entire outstanding balance 

of disgorgement, prejudgment interest, and civil penalties, plus any additional interest accrued 

pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717, shall be due and payable 

immediately, without further application.  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 War 

Chest 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 

 

                                                 
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.