Paulson Investment Company LLC

Paulson Investment Company LLC was fined $135,000 for violating Rule 203(b)(1) of Regulation SHO of the Securities Exchange Act of 1934 (Reg SHO) by effecting at least 15,000 short sale transactions representing approximately 64.5 billion shares for its own account without first borrowing the securities, entering into a bona fide arrangement to borrow the securities, or having reasonable grounds to believe the securities could be borrowed and delivered on the settlement date.

The findings stated that the firm failed to establish and maintain a supervisory system, including WSPs, reasonably designed to achieve compliance with the locate requirement of Rule 203(b)(1) of Reg SHO. The firm had no processes or procedures addressing the firm’s short selling activity, requiring traders to obtain locates in connection with that activity, or identifying the circumstances under which exemptions to the locate requirement may apply.

The firm also had no supervisory system, surveillance, or other review to monitor the firm’s compliance with the locate requirement for proprietary short sales.