Brothers Reaped $17 Million From Illegal Short Sales, SEC Says

The U.S. Securities and Exchange Commission accused two brothers of reaping more than $17 million from improper short sales of stocks without having borrowed the securities they were betting against.

Jeffrey Wolfson and Robert Wolfson made so-called naked short sales from July 2006 to July 2007 in stocks including Chipotle Mexican Grill Inc., Fairfax Financial Holdings Ltd., and NYSE Group, the SEC said in an order filed today.

In a short sale, an investor borrows shares and sells them with the goal of profiting from a price decline by repurchasing at a lower price and repaying the loan. SEC rules require sellers to locate shares before selling them short, and require that the borrowed securities be returned by a specified date.

Michael Wise, an attorney for Jeffrey Wolfson, and Thomas McCabe, a lawyer for Robert Wolfson, declined to comment.