NASDAQ PHLX LLCNOTICE OF ACCEPTANCE OF AWC
Certified, Return Receipt Requested
TO:

Monadnock Capital Management, LP
Mr. Youngjoe Loh
Chief Compliance Officer
1845 Walnut Street, #940
Philadelphia, PA 19103

FROM:

Nasdaq PHLX LLC (“Phlx” or “Exchange”)
Phlx Enforcement Department
805 King Farm Blvd
Rockville, MD 20850

DATE:April 8, 2019

RE: Notice of Acceptance of Letter of Acceptance, Waiver and Consent No. 2018.07.0023
Please be advised that your above-referenced Letter of Acceptance, Waiver and Consent(“AWC”) has been accepted on April 8, 2019 by the Phlx Exchange Review Council's
Review Subcommittee, or by the Office of Disciplinary Affairs on behalf of the Phlx
Exchange Review Council, pursuant to PHLX Rule 9216. A copy of the AWC is enclosed
herewith.
If applicable, you are again reminded of your obligation, if currently registered, immediately
to update your Uniform Application for Broker-Dealer Registration (“Form BD”) to reflect
the conclusion of this disciplinary action. Additionally, you must also notify Phlx in writingof any change of address or other changes required to be made to your Form BD.
You will be notified by the Registration and Disclosure Department regarding sanctions if asuspension has been imposed. If a fine or disgorgement has been imposed, payment will behandled in accordance with your Payment Information Form.

NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2018.07.0023
TO:Nasdaq PHLX LLC
Phlx Enforcement Department

RE:

Monadnock Capital Management, LP
Respondent Member Firm
CRD No. 124605

Pursuant to Rule 9216 of Nasdaq PHLX LLC (“Phlx” or the “Exchange”) Code of Procedure,Monadnock Capital Management, LP (the “Firm,” “Monadnock,” or “Respondent”) submits
this Letter of Acceptance, Waiver and Consent (“AWC”) for the purpose of proposing asettlement of the alleged rule violations described below. This AWC is submitted on thecondition that, if accepted, Phlx will not bring any future actions against the Respondent
alleging violations based on the same factual findings described herein.
I.
ACCEPTANCE AND CONSENT
A.

Respondent hereby accepts and consents, without admitting or denying the findings,and solely for the purposes of this proceeding and any other proceeding brought by oron behalf of Phlx, or to which Phlx is a party, prior to a hearing and without anadjudication of any issue of law or fact, to the entry of the following findings by Phlx:
BACKGROUND
The Firm has been a Phlx member since January 2, 2003, and its registration remains ineffect. The Firm is headquartered in Wilmington, Delaware and operates as an options
market-making firm. The Firm has eight Registered Options Traders. The Firm has noprior relevant disciplinary history.
SUMMARY
The Firm tendered shares in connection with the partial tender offer for Weyerhaeuser Co.
(“WY”) that commenced on May 22, 2014 and expired on July 2, 2014. During thatpartial tender offer, the Firm tendered shares in excess of its net long position, in violationof Rule 14e-4, promulgated under the Securities Exchange Act of 1934, and Phlx Rule707. The Firm also failed to establish and maintain a supervisory system and written
supervisory procedures (“WSPs”) that were reasonably designed to prevent and detect,insofar as practicable, the over-tendering of shares in a partial tender offer, in violation ofPhlx Rule 748.
FACTS AND VIOLATIVE CONDUCT
1. Rule 14e-4 prohibits both short and hedged tendering to enhance the fairness of theproration process by preventing certain tendering persons from gaining an advantage
in the proration pool at the expense of others, and it assures equal application of theproration factor to each tendering person’s net ownership in the tendered shares.
2. Rule 14e-4 provides, in relevant part, that it “shall be unlawful for any person acting
alone or in concert with others, directly or indirectly, to tender any subject security in1

a partial tender offer . . . [f]or his own account unless at the time of the tender, and at
the end of the proration period . . . he has a net long position equal to or greater than
the amount tendered in . . . the subject security . . . or . . . an equivalent security.”
3. Phlx Rule 707 states that a member, member organization, or person associated with oremployed by a member or member organization shall not engage in conduct inconsistent
with just and equitable principles of trade.
4. Phlx Rule 748(b) requires member organizations to provide for appropriate supervisory
control of the organization and compliance with securities laws and regulations,
including Phlx’s By-Laws and Rules. Member organizations are required to provide forappropriate written procedures of supervision and control, and to establish a separate
system of follow-up and review to determine that the delegated authority andresponsibility is being properly exercised.
5. Phlx Rule 748(h) requires member organizations to establish, maintain, and enforce
WSPs, and a system for applying such procedures, reasonably designed to prevent anddetect, insofar as practicable, violations of securities laws and regulations, including theBy-Laws and Rules of Phlx.
6. During the partial tender offer for WY that commenced on May 22, 2014 and expiredon July 2, 2014, the Firm tendered 46,501 shares in excess of its net long position.
7. The conduct described in paragraph 6 constitutes a violation of Rule 14e-4 and Phlx
Rule 707.
8. Until March 2017, the Firm did not have in place any WSPs relating to compliancewith Rule 14e-4.
9. In March 2017, the Firm updated its WSPs relating to compliance with Rule 14e-4.
However, the Firm failed to establish and maintain a supervisory system and WSPs
that were reasonably designed to prevent and detect, insofar as practicable, violationsof Rule 14e-4. While the Firm’s WSPs made reference to the requirements of Rule14e-4, the Firm’s WSPs failed to: (i) provide guidelines, procedures, or controls
reasonably designed to prevent and detect violations of the Rule 14e-4; and (ii)address whether supervisors should review for over-tendering of shares in a partial
tender offer, how to review for such activities, and what escalation or remedialactions, if any, to take if such activities are discovered. However, the Firm has since
updated its WSPs to memorialize system improvements the Firm has implemented
with respect to monitoring and reviewing for violations of Rule 14e-4.
10. The conduct described in paragraphs 8 and 9 constitutes violations of Phlx Rule 748.
B.

Respondent also consents to the imposition of the following sanctions:
1. A censure;
2. A fine in the amount of $10,000.00; and3. Disgorgement in the amount of $28,917.00.
Respondent agrees to pay the monetary sanction(s) in accordance with its Payment
Information Form.
Respondent specifically and voluntarily waives any right to claim that it is unable to pay,
now or at any time hereafter, the monetary sanction(s) imposed in this matter.
2

The sanctions imposed herein shall be effective on a date set by Phlx Enforcement
Department staff.
II.
WAIVER OF PROCEDURAL RIGHTS
Respondent specifically and voluntarily waives the following rights granted under Phlx’s Codeof Procedure:A.

To have a Formal Complaint issued specifying the allegations against the Firm;

B.

To be notified of the Formal Complaint and have the opportunity to answer theallegations in writing;C.

To defend against the allegations in a disciplinary hearing before a hearing panel,to have a written record of the hearing made and to have a written decision
issued; andD.

To appeal any such decision to the Phlx Exchange Review Council and then tothe U.S. Securities and Exchange Commission and a U.S. Court of Appeals.

Further, Respondent specifically and voluntarily waives any right to claim bias or prejudgmentof the Chief Regulatory Officer, the Phlx Exchange Review Council, or any member of thePhlx Exchange Review Council, in connection with such person’s or body’s participation indiscussions regarding the terms and conditions of this AWC, or other consideration of thisAWC, including acceptance or rejection of this AWC.
Respondent further specifically and voluntarily waives any right to claim that a person
violated the ex parte prohibitions of Phlx Rule 9143 or the separation of functions
prohibitions of Phlx Rule 9144, in connection with such person’s or body’s participation in
discussions regarding the terms and conditions of this AWC, or other consideration of thisAWC, including its acceptance or rejection.

3III.
OTHER MATTERS
Respondent understands that:A.

Submission of this AWC is voluntary and will not resolve this matter unless anduntil it has been reviewed and accepted by the Phlx Enforcement Department
and the Phlx Exchange Review Council, the Review Subcommittee, or theOffice of Disciplinary Affairs, pursuant to Phlx Rule 9216;

B.

If this AWC is not accepted, its submission will not be used as evidence toprove any of the allegations against the Respondent; andC.

If accepted:

D.

1.

This AWC will become part of the Respondent’s permanent disciplinary
record and may be considered in any future actions brought by Phlx or
any other regulator against the Respondent;

2.

Phlx may release this AWC or make a public announcement concerning
this agreement and the subject matter thereof in accordance with Phlx
Rule 8310 and IM-8310-3; and3.

Respondent may not take any action or make or permit to be made any
public statement, including in regulatory filings or otherwise, denying,directly or indirectly, any finding in this AWC or create the impressionthat the AWC is without factual basis. Respondent may not take any
position in any proceeding brought by or on behalf of Phlx, or to which
Phlx is a party, that is inconsistent with any part of this AWC. Nothing inthis provision affects the Respondent’s right to take legal or factual
positions in litigation or other legal proceedings in which Phlx is not aparty.

Respondent may attach a Corrective Action Statement to this AWC that is astatement of demonstrable corrective steps taken to prevent future misconduct.
Respondent understands that it may not deny the charges or make any
statement that is inconsistent with the AWC in this Statement. This Statement
does not constitute factual or legal findings by Phlx, nor does it reflect theviews of Phlx or its staff.

4

PAYMENT INFORMATION
For firms, the fine and/or disgorgement amount will be reflected on an upcoming invoice andwill be direct debited from the account for your firm that the Exchange currently has on file.
Please DO NOT submit payment at this time.
Please inform your finance or applicable department of this forthcoming debit.
For individuals, and for firms that would like to arrange for an alternative method of payment,
please enter the billing contact information below and the Exchange’s Billing Department willcontact you. Otherwise, please leave the following information blank.
Kate Chupein
Billing Contact Name: _________________________
950 Chesterfield Road, # 130, Lewisville, PA 19351
Billing Contact Address: ___________________________________________________
kchupein@mcmoptions.com
Billing Contact Email: ______________________________
215-990-4813
Billing Contact Phone Number: _________________________

Respectfully submitted,

Respondent
Monadnock Capital Management, LP
April 3, 2019
Date

By: ______________________
Youngjoe Loh
Name: ____________________
CCO
Title: _____________________