On September 17, 2013, the SEC announced charges against 23 investment management firms, including some notable hedge fund managers, in connection with violations of Rule 105 under Regulation M under the Securities Exchange Act of 1934.  Rule 105 generally prohibits a person from purchasing equity securities in a public offering if that person has previously sold short the same security during the Rule 105 restricted period (generally five days before the public offering).  While neither admitting nor denying wrongdoing, 22 of the 23 firms settled with the SEC, resulting in a total of more than $14.4 million in disgorgement and penalties.  In addition to announcing the enforcement actions, the SEC’s National Examination Program concurrently released a risk alert highlighting, among other things, best practices for Rule 105 compliance.  This article provides a brief overview of Rule 105, summarizes the risk alert and describes the facts, charges and sanctions outlined in illustrative settlements with two hedge fund management firms.  See also “Touradji Capital Settlement Suggests That Having Employee Training on Rule 105 under Regulation M Without Policies to Prevent Violations Will Not Insulate a Firm From SEC Enforcement,” Hedge Fund Law Report, Vol. 4, No. 46 (Dec. 21, 2011); “Brookside Settlement Suggests That in Calculating Disgorgement Based on a Rule 105 Violation, the SEC Will Look to the Number of Shares Purchased in a Secondary Offering Rather Than the Number of Shares Sold Short Prior to the Offering,” Hedge Fund Law Report, Vol. 4, No. 22 (Jul. 1, 2011).