The SEC brought a settled action against Sourcerock Group, LLC, a hedge fund manager with approximately $2.6 billion in RAUM for violating Rule 105 of Regulation M of the Securities Exchange Act of 1934. Rule 105 prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the offering, absent an exception. Rule 105 applies regardless of the trader's intent and is designed to prevent potentially manipulative short selling before the pricing of covered secondary offerings of securities. The SEC found that Sourcerock violated Rule 105 by purchasing an equity security for the accounts of six of its private fund clients in a covered offering after Sourcerock had sold short the same security on behalf of those clients during Rule 105’s restricted period without an applicable exception. The firm agreed to a $250,000 penalty and cooperated with the SEC's investigation.