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You have mine and many other's support, I am with you all the way!!! Thanks JR you are the best
jrdig7, RE: meeting with the 2 Senators from SC -
fyi. dd....ex....
http://investorshub.advfn.com/boards/board.asp?board_id=4887
http://investorshub.advfn.com/boards/board.asp?board_id=7537
http://siliconinvestor.advfn.com/subject.aspx?subjectid=55464&ref=IH
http://investorshub.advfn.com/boards/board.asp?board_id=3319
http://investorshub.advfn.com/boards/board.asp?board_id=4888
http://investorshub.advfn.com/boards/board.asp?board_id=3328
Posted by: plastipunk
In reply to: lowman who wrote msg# 1683
Date:7/30/2007 3:41:17 PM
Post #of 1711
Don't know if this has been posted before, but here goes:
If you agree with what Senator Bennett is doing, please email him and thank him. http://bennett.senate.gov/contact/email_opinion.cfm
Senator Bennett Discusses Naked Short Selling on the Senate Floor July 20, 2007
Mr. President, after all the fireworks and contention on some previous issues this week, I rise to speak about something that has very little interest to most Americans but tremendous interest, I believe, to a certain portion of our economy. I want to use this opportunity to call it to the attention of the Senate.
I am talking about a practice that occurs in the stock market that has the very interesting name of naked short selling. That conjures up all kinds of interesting images in many people's minds, but this is what it is: It is a practice where somebody sells short a particular stock and never ever has to cover the sale.
Now, even that may be too much stock-market-type jargon for people to understand what I am talking about. So let me quote from an article that appeared in the Wall Street Journal a few weeks ago.
Mr. President, I ask unanimous consent that the article be printed in the Record at the conclusion of my remarks.
Quoting from the article, it says:
“The naked [short selling] debate is a product of the revolution that has occurred in stock trading over the past 40 years. Up to the 1960s, trading involved hundreds of messengers crisscrossing lower Manhattan with bags of stock certificates and checks. As trading volume hit 15 million shares daily, the New York Stock Exchange had to close for part of each week to clear the paperwork backlog.”
As an insert in the quotation, I remember those days. I was trading in the stock market at the time, and having the market shut down to clear the back office paperwork was not an unusual experience. Going back to the article:
“That led to the creation of DTCC (The Depository Trust and Clearing Corporation), which is regulated by the SEC.”
If I might, as an aside, I do not think that last statement is true. I am not sure that the SEC has control over the DTCC. Almost all stock is now kept at the company's central depository and never leaves there. Instead, a stock buyer's brokerage account is electronically credited with a ``securities entitlement.'' This electronic credit can, in turn, be sold to someone else.
Replacing paper with electrons has allowed stock-trading volume to rise to billions of shares daily. The cost of buying or selling stock has fallen to less than 3.5 cents a share, a tenth of paper-era costs.
But to keep trading moving at this pace, the system can provide cover for naked shorting, critics argue. If the stock in a given transaction isn't delivered in the 3-day period, the buyer, who paid his money, is routinely given electronic credit for the stock. While the SEC calls for delivery in three days, the agency has no mechanism to enforce that guideline.
This is where the practice of naked short selling comes in. I did not really understand it until I had some investment bankers--not the kind you find on Wall Street but the more modest kind you find in Salt Lake City--sit me down in front of a screen and show me what happens with stock trading. To put it in the simplest terms, someone who wants to sell short--that is, sell stock he does not own--will place a sale order.
Now, when I first sold short as a participant in the market, my broker gave me this crude little poem to remember. He said: ``He who sells what isn't his'n, must buy it back or go to prison.'' He said: You have to understand, if you sell a stock short, the time is going to come when you are going to have to buy it back to cover that sale by delivering shares. In the days the Wall Street Journal talked about, that meant buying a crinkly piece of paper--a stock certificate--and delivering it so you have covered your short sale.
Today, that is not the case because all of the stock certificates are gone, and the crinkly pieces of paper have been replaced by electronic impulses in a computer. So this is what happens. A short seller enters the market and says: I want to short--I want to sell--1,000 shares of XYZ stock. That means at some point he has to produce 1,000 shares to cover his sale. How do you do that? You borrow the shares, and then you buy them back at some future time.
All right. From whom do you borrow them? The DTCC. They have all the shares on deposit, and so you go to the DTCC and you say: I want to borrow 1,000 shares of XYZ stock. They say: Fine, we have them on deposit. We will lend them to you so you can use them for your short sale.
All right, everything is fine--except in this electronic age, it is possible for you to keep shuffling around the electronic impulses that represent the stock and never ever have to buy it back.
Stop and think about that. That is a pretty good business plan. You can sell as much as you want and never ever have to pay for it. If a stock is trading at $5 a share, you could go in and sell 1,000 shares, and you get paid $5,000 for selling 1,000 shares, and you never have to buy them. Because you are constantly moving around the electronic impulses that represent those shares, you never have to cover.
Now, when you talk to the DTCC people, they say: No, we always make sure there is a delivery. And if there is not, it is not our fault. It is not our responsibility to police this. It is up to the brokerage houses to do this.
The SEC has spent enough time looking at this and enough time talking to me that they issued to me a three-page letter outlining the steps they have taken to stop the practice of naked short selling.
I think the SEC letter goes a long way--the SEC actions go a long way. Without getting too technical about it, they have taken a number of steps to prevent what are called ``fails to deliver'' and, therefore, to try to stop the naked short-selling situation.
But I have discovered something that appears to be a way around the SEC rules. Here is the transaction: Broker A shorts 1,000 shares. At the end of 13 days, which is the period he has to produce the shares, he has been unable to find any--probably hasn't even looked--but he has this requirement under the SEC rule to produce 1,000 shares. So he goes to broker B and says quietly: Sell me a thousand shares. Broker B says: I don't have any. Broker A says: It doesn't matter; sell me a thousand shares so I can cover. Broker B: All right. I will sell you a thousand shares so you can cover and there will be no passage of money; this is a deal between the two of us--a rollover. At the end of 13 days, broker B has to deliver a thousand shares, so broker A sells the same 1,000 phantom shares back to broker B, and they ping-pong these back and forth for as long as they want.
So you can have a situation where people are selling shares that don't exist, taking commissions on the sale, and the profits of the sale, and never, ever having to produce the shares.
I think it is serious enough that we ought to have a hearing about this in the Banking Committee. I have spoken to the chairman of the Banking Committee, Senator Dodd, and asked him if it wouldn't be possible for us to have such a hearing at some point in the future. He has expressed a willingness to do that. I understand we can't set a time for that right now; there are too many other things going on in the Banking Committee. But I am delighted to know he is willing to cooperate with us in examining this issue.
I would like to suggest several things I would like to discuss at that hearing. First, by the way, I want the officials of the DTCC to have the opportunity to come in and explain how it works. I have seen letters to the editor in the Wall Street Journal, where they say this article is inaccurate, and I don't want to be relying on this article if it is inaccurate. I think a congressional hearing is a good place for those who are running the DTCC to explain to us how it works. I would like the SEC to come in and give us their background and information as to how their rules are working to try to stop the naked short selling. But I have these two additional recommendations that I would hope we could get done by regulation and, if not, I am prepared to introduce legislation to deal with them.
First, I think there should be a rule which says there cannot be borrowing, that brokers cannot borrow for short sales more stock than is on deposit with the DTCC. I think that is obvious. If there are 3 million shares of XYZ Company on deposit at the DTCC, people should not be able to short sell 4 million shares. I have seen the situation where people with these small companies--and all this happens primarily in little companies--people with small companies, in an effort to defend their stock against the short sales that are rolling over, are buying stock, and it is electronically credited to them and end up on paper, or at least on computer, owning more shares than exist. How can that be? If somebody buys the stock for his company and ends up owning 110 percent of the issued stock, and people are still selling that stock, you know you are dealing with phantom shares.
So my first recommendation would be that the DTCC cannot make available as loans for short sellers more stock than they have on deposit. Once they have reached the point that 100 percent of the shares they have on deposit have been loaned out, they can't loan out any more. I think that is an obvious commonsense recommendation, but it doesn't apply now.
Secondly, I think there ought to be a rule which says a broker cannot be paid a commission on a short sale until the shares are delivered. Back to the business model. The broker sells $5,000 worth of stock. He can do it every day. He can get $5,000 every day, without ever having to cover the stock, and he gets a commission on making the sale. So if you say, no, there will be no commissions paid until the stock is delivered, you will have a significant impact on stopping this activity.
Now, people who hear the complaints about naked short selling say: It only represents a tiny percentage of the trillions of dollars' worth of trading activity that goes on in American markets every day. They are right. It is only a tiny percentage. But that is small comfort to those who have gotten a few dollars together, formed a business, gone to the market to try to raise some capital to support the business, put on the marketplace, say, 25 percent of their shares, holding the other 75 percent for themselves, and then getting some support in the market so that the shares edge up from 25 cents to 50 cents to $1, to $1.25 and then suddenly see the short sellers come in and say: OK, we will drive that stock back down from $1.25 to 2.5 cents, and we will do it by selling stock that doesn't exist and in the process we will ruin the company.
The one thing that convinced me this was real was when the investment bankers sat me down in front of a screen and showed me the stock trading of a company that has been out of business for 3 years, and the stock trades regularly, every 13 days. You know exactly what they are doing. The brokers are rolling the stock back and forth every 13 days, so they are meeting the SEC requirements--they are delivering--but the shares they are delivering to each other back and forth do not exist. The company was driven out of business by the short sellers who made it impossible for them to go to the capital markets.
As I said in my opening remarks, this is a tiny matter. It does not involve very many people, but to the people who are involved, it, frankly, can be a matter of life and death. There are enough of them starting businesses and creating entrepreneurial activity in the United States that we owe it to them to find out exactly what is going on with respect to this activity. That is why I have asked Chairman Dodd to consider a hearing on this matter to let us hear from the SEC, to let us hear from the DTCC, and to let us hear from those in the marketplace who have actual experience and see if the present SEC rules are sufficient or if we need to do additional things along the lines of the two items I have suggested.
I yield the floor.
http://bennett.senate.gov/
Posted by: mastaflash
In reply to: None
Date:7/31/2007 7:32:38 PM
Post #of 180178
Of interest RE naked shorting:
NEW YORK, July 31 /PRNewswire/ -- The American Stock Exchangeâ (Amexâ) today announced two final disciplinary actions for violations of Securities and Exchange Commission (SEC) Regulation SHO short sale rules in connection with trading activity in threshold securities, which occurred on various options and equity exchanges. In the first action, Scott H. Arenstein and his firm SBA Trading, agreed to a fine of $3.6 million, disgorgement of $1.4 million in trading profits, a censure and a five-year suspension from Amex membership in any capacity, including employment or association with an Amex member or member organization during such period. In the second action, Brian A. Arenstein and his firm ALA Trading, LLC agreed to a fine of $1.2 million, disgorgement of $1.8 million in trading profits, a censure and a five-year suspension from Amex membership in any capacity, including employment or association with an Amex member or member organization during such period.
SEC Regulation SHO generally requires market participants to locate shares to borrow prior to effecting a short sale transaction. However, options market makers receive a limited exemption from this requirement when selling an underlying equity security short to hedge options positions established during the course of bona fide options market making activity.
Despite the fact that neither respondent was acting as a bona fide options market maker in the particular securities in question, each of them improperly utilized this market maker exemption to impermissibly engage in naked short selling by failing to locate securities to borrow and then engaged in a series of close out transactions designed to circumvent his Regulation SHO delivery obligations in such securities by creating the appearance of a bona fide repurchase of the securities he initially sold short. As a result of this violative trading activity, they were able to maintain impermissible naked short positions in a number of Regulation SHO threshold securities for a virtually unlimited period of time.
"Regulation SHO is a critically important framework of regulatory requirements designed to prevent and deter abusive short selling and reduce persistent fails to deliver. The respondents' circumvention of these requirements was egregious and improperly contributed to persistent fails to deliver in certain Regulation SHO threshold securities," said Claudia Crowley, Senior Vice President and Chief Regulatory Officer of the Amex. "This settlement should send a strong message to other market participants that trading which involves the improper use of the Regulation SHO market maker locate exemption and circumvention of the requisite delivery obligations are unacceptable and will result in serious sanctions."
Scott H. Arenstein, SBA Trading, Brian A. Arenstein and ALA Trading consented to findings that they violated SEC Rule 203, Article V, Sections 4(h) and (i) of the Amex Constitution and Amex Rule 958 - ANTE. In settling these matters the respondents neither admitted nor denied the charges.
This violative activity was detected and investigated by the Financial Industry Regulatory Authority (FINRA), formerly the NASD, acting on behalf of the Amex's Regulatory Division.
The Decisions and related Stipulations of Facts and Consent to Penalty can be viewed at the following link:
http://www.amex.com/?href=/atamex/regulation/discipline/at_regdiscipline.html
Excellent article. It's past time for all of us to complain long, loud, and often to our Congressmen.
I've e-mailed my congresman several times as well as our senator with no reply...anyway thought this might interest you....
Sen. Bennett Renews Call for Hearing into Stock Market Fraud
by Mark Faulk
In a speech on the floor of the U.S. Senate today, Senator Bob Bennett (R-UT) called for Senate Banking Committee Chairman Chris Dodd to conduct a hearing into stock market fraud, <bspecifically addressing the issue of naked short selling. Sen. Bennett has been a long time proponent of stock market reform, and was instrumental in proposing a Senate Banking Committee hearing into naked short selling as early as late 2004, which were eventually shelved by then Banking Committee Chairman Sen. Richard Shelby (R-AL). He said that Sen. Dodd, who has entered the 2008 Presidential election, was willing to conduct a hearing into the issue:
“I think it is serious enough that we ought to have a hearing about this in the Banking Committee, and I have spoken to the Chairman of the Banking Committee, Senator Dodd, and asked him if it wouldn’t be possible for us to have much of a hearing at some point in the future, and he’s expressed a willingness to do that. I can understand, we can’t set a time for that right now. There are too many other things going on in the Banking Committee, but I’m delighted to know that he’s willing to cooperate with us in examining this. And I would like to suggest several things that I would like to discuss at that hearing.”
A source close to the issue said, “Senator Bennett has spent an enormous amount of time studying this problem, he’s intimately familiar with the abuses in the stock market. This speech is his opening salvo.” He went on to say that “We need an avalanche of letters and emails from every state in the Union going to every member of the U.S. Senate, urging Sen. Dodd, the chairman of the Banking Committee, to hold the hearing on Sen. Bennett’s recommendations.”
After first explaining the basic issue of naked short selling to his fellow Senators, Sen. Bennett then addressed the SEC and the creation of the DTCC, and their role in trade settlement, and how the need for a system to facilitate trade settlement led to the creation of the DTCC, or the Depository Trust and Clearing Corporation. He said that the while the DTCC is regulated by the S.E.C. that” I don’t think that last statement is true. I’m not sure that the S.E.C. has control over the DTCC. He then quoted from a Wall Street Journal article that said, “Almost all stock is now kept at the company central depository and never leaves there. Instead, a stock buyers’ brokerage account is electronically credited with the securities entitlement. This credit can, in turn, be sold to someone else.”
Then Sen. Bennett described how electronic settlement, which he called “replacing paper with electrons,” can “provide cover for naked shorting of the stock” because shareholders are given an electronic credit for the purchase instead of physical delivery of the shares. From there, he described how electronic trading, and the DTCC’s practice of keeping shares in what has become known as the “DTCC Borrow Pool,” invites manipulation of the system:
“So this happens: a short seller enters the market and says, “I want to short—I want to sell 1,000 shares of XYZ stock so at some point he has to produce 1,000 shares to cover his sale. How do you do that? You borrow the shares. And then you buy them back at some future time. All right. From whom do you borrow them? The DTCC. They have all of the shares on deposit. So you go to the DTCC and you say, I want to borrow 1,000 shares of XYZ stock. They say, fine, we have them on deposit and will lend them to you so you can use them for your ‘short’ sale. All right, everything’s fine. Except that, in this electronic age, it is possible for you to keep shuffling around the electronic impulses that represent the stock and never, ever, have to buy it back. Stop and think about that, Mr. President. That’s a pretty good business plan. You can sell as much as you want and never, ever, have to pay for it. You could go in, the stock trading at $5 a share. You go in and sell 1,000 shares. You paid $5,000 for selling 1,000 shares and you never have to buy them. Because you are constantly moving around the electronic impulses that represent those shares. You never have to cover.
Now, when you talk to the DTCC people they say ‘No, we always make sure that there is a delivery and if there’s not, it’s not our fault. It’s not our responsibility to police this, it is up to the brokerage house to do this.’ The S.E.C. has spent enough time looking at this and enough time talking to me that they issued to me a three-page letter outlining the steps they have taken to stop the practice of ‘naked short selling.’”
After talking about recent rules implemented by the S.E.C. in an effort to deal with the problem of naked short selling, he talked about another method of circumventing the rules, a scheme that is commonly referred to as “stock kiting,” where two brokers pass shares back and forth between themselves, with each one holding the shares for thirteen days, the limit before forced settlement of the trade, and then passing it back to the other broker, where, according to Sen. Bennett, “they ping-pong these back and forth as long as they want. So you can have a situation where people are selling shares that don’t exist, taking commissions on the sale, and the profits of the sale, and never ever having to produce the shares.”
Bennett also said “I think a Congressional hearing is a good place for those who are running the DTCC to explain to us how it really works. And I would like the S.E.C. to come in and give us their background and information as to how their rules are working to try to stop the naked short selling.”
He laid out a number of proposals in his speech, including “a rule that says that brokers cannot borrow for short sales more stock than is on deposit with the DTCC. I think that’s just obvious. If there are 3 million shares of XYZ company on deposit at the DTCC, people should not be able to short sell 4 million shares…So my first recommendation would be that the DTCC cannot make available loans for short sellers more stock than they have on deposit. Once they have reached the point that 100% of the shares they have on deposit have been loaned out, they can’t loan out anymore. I think that’s just an obvious, commonsense recommendation, but it doesn’t apply now.” He also said, “there ought to be a rule that says that a broker cannot be paid a commission on a short sale until the shares are delivered.”
"It does not involve very many people, but for the people—to the people who are involved, it, frankly, can be a matter of life and death. And there are enough of them starting businesses and creating entrepreneurial activities in the United States that we owe it to them to find out exactly what is going on with respect to this.
That’s why I’ve asked Chairman Dodd to consider a hearing on this matter, to let us hear from the S.E.C., to let us hear from the DTCC, to let us hear from those in the marketplace who have actual experience with this and see if the present S.E.C. rules are sufficient or if we need to do additional things around the lines of the two items that I have suggested.”
Our anonymous source, who has spent years behind the scenes working for stock market reform, stressed that the hearing could hinge on the level of response from those who have been affected by stock market fraud, saying, “There’s been no bill introduced, but Senator Bennett is prepared to introduce a bill if these issues are not resolved. We need a nationwide campaign to get people to write their senators urging them to tell Sen. Dodd to hold hearings into the issues that Sen. Bennett addressed in the U.S. Senate today.”
--------------------------------------------------------------------------------
TAKE ACTION NOW!!! WITHOUT YOUR HELP, WE WOULD NOT BE TALKING ABOUT THIS IN THE U.S. SENATE....WITH YOUR HELP, WE CAN FIX OUR STOCK MARKETS!!!
To contact your Senator, go to:
http://www.visi.com/juan/congress/
To contact Senator Chris Dodd, go to:
http://dodd.senate.gov/index.php?q=node/3128&cat=Opinion
or write him at:
U.S. Senator Chris Dodd
448 Russell Building
Washington D.C., 20510
or:
U.S. Senator Chris Dodd
30 Lewis St Suite 101
Hartford, CT 06103
Looking forward to hearing from you. The more people that speak out the better. Thanks for stopping by.
What's up JR............
Speaking of marked deck's I e-mailed my local congressional rep a couple of weeks ago about NSS and manipulation still no reply, I believe I'll send another this weekend, let ya know when and if I get a reply.....Putting this board on fav's, so I can keep up with all the criminal activity in the pink's/ otcbb. GIVE'EM HELL BUD!!!!!!!!!!!!!
Not many people stop by but when I find posts that fit I add them here. A lot of good stuff, a shame the market is so rigged. Feel free to add anything of value.
Great article on shorting. http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20070423/FREE/70423007/1009/TOC
Posted by: ddc3tx
In reply to: None
Date:4/15/2007 1:31:40 PM
Post #of 10839
Here's how the game is being played.
Found this on another board, long but interesting reading.
NAKED SHORT SELLING
(excerpted from Dateline Research)
To get a handle on the concept of naked short selling, one has to know a little about the steps and players involved in the processing of a buy order on the OTCBB and Pink Sheets.
Step 1: The purchaser either calls his broker on the phone or reaches his brokerage firm on the Internet. Let’s assume he decides to buy a 1% interest in a penny stock that has 100 million shares issued and outstanding. The buy order is thus for 1 million shares. Let’s assume the buy order is “at market”.
Step 2: The broker on the receiving end of the order then writes up the buy order and places the order on his firm’s “Trading desk”.
Step 3: Assuming that the firm does not make a market in this security, they will hand the order on to a market maker that does.
Step 4: This buying market maker will then either go to the selling market maker showing the lowest offer or to a favorite market maker of his and ask him to match the lowest offer. The trade is executed between the buying and selling market makers at the agreed upon lowest offering price.
Step 5: Assuming the buying and selling brokerage firms are small and do not have the facilities to “clear” the trade, they then send the details of the trade to their respective clearing firms.
Step 6: Since both clearing firms have both “cash” and “shares” accounts at the DTCC, the buying clearing firm wires the purchase price from their “cash” account to that of the selling clearing firm in exchange for the selling clearing firm wiring the 1 million share block from their “shares” account to the buying clearing firm’s “shares” account. This is called “Delivery versus payment”. The buying brokerage firm then sends out both a trade confirmation and a monthly statement to their client, the buyer of the 1 million shares, indicating that he does indeed “own” the 1 million shares, what he thinks to be 1%, of that company. Thus the transaction is complete. A “real” buyer paid “real” cash to a “real” seller for “real” shares. An intermediary known as a market maker provided a mechanism to bring the buyer and seller together. This basically is an over-simplified explanation of the system used on these trading venues, the OTCBB and the Pink Sheets. Selling market makers do not really have to have a sell order in hand to sell securities. Their job is to provide liquidity and to buffer the market from sharp peaks and deep troughs when an imbalance of buy or sell orders appears.
The phenomenon of illegal naked short selling (INSS) is a form of market manipulation/securities fraud that can be perpetrated at any step in the process. A legitimate short sale involves the seller following the letter and spirit of Rule 10(a)1, “The short sale rule”. It involves the selling firm making “affirmative determination in writing” that the shares being sold are indeed “borrowable”. It also prohibits short sales on a downtick. The borrowed shares are later returned. In illegal naked short selling, the shares were not only not borrowed, but they never did exist in the first place. They were created out of thin air. The legal term that describes this fraud is that the perpetrators created an “Artifice to defraud” the purchasers of the shares. Rule 10(b)-5 of the 1934 “Exchange Act” addresses this behavior.
PREEXISTING CONDITIONS AMENABLE TO NAKED SHORT SELLING
In order for this fraud to be perpetrated on unsuspecting investors, two main prerequisites exist. The first is the fact that purchasers of shares on these trading venues do not request the registration and home delivery of their shares. They see an entry on their monthly brokerage statement and have no reason to question its validity.
The second prerequisite is the fact that brokerage firms do not monitor for the “good delivery” of shares purchased by their clients as mandated by “The Customer Protection Rule” or Rule 15 (c) 3-3. With the presence of these two prerequisites as being the “norm” on these trading venues, clever opportunists have realized that they can sell nonexistent shares through Canadian margin accounts, in an undetected fashion, and thereby assume a “naked” short position.
This followed by the subsequent selling of yet more nonexistent shares tends to result in a precipitous drop in the share price, a share rollback of the victim corporation and its disastrous loss of market cap, or the outright bankruptcy of the victim corporation which circumvents the need for the naked short position to be closed, as it no longer trades. This lack of closure of the “sell then buy” circuit allows the massive proceeds of this fraud to bypass the taxman.
The typical naked short selling campaign or “bear raid” results in the death of the victim company within a 6 to 9 month period. The management teams and investors are often left scratching their heads wondering what hit them.
A variety of other preexisting conditions are present on these trading venues that allow this fraud to be perpetrated with little chance of detection. One of these is the inherent inability of a public corporation to communicate with its shareholders holding shares in “Street Form”.
The advent of the Internet has helped somewhat though. Statistics show that 8 of 10 companies trading on these 2 trading venues, the OTCBB and Pink Sheets, will die within their first three years of existence. These thinly traded and under-capitalized companies are often no more than “shell” companies whose existence was designed to line the pockets of their creators. The level of chicanery on these trading venues is distinct and the investment community knows about it. When the Vancouver Stock Exchange drastically buckled down on fraudulent behavior several years ago, the scamsters headed south of the border to the OTCBB and Pink Sheets.
The above statistic of 8 of 10 failures combined with the knowledge of the massive amounts of “pump and dump” programs in effect has caused the investment community to collectively look upon these companies as “future bankruptcies”. This mindset leads to certain behaviors among those opportunists that have visibility of buy orders for these “future bankruptcies”.
When a buy order for one of these presupposed “scams” lands then the entire investment community has their antennae up and a certain “feeding frenzy” occurs wherein the investment “professionals” fight amongst themselves to be the one to naked short sell into this buy order. Also these trading venues have very little supervision by the regulators who are strapped for cash as well as manpower. There really are no “cops on the beat”.
The Pink Sheets, for example, are a privately run trading venue, owned and operated by the National Quotation Bureau. Who needs regulators though when you have naked short sellers determining which corporations are “scams” and systematically annihilating them? The markets themselves have no visibility whatsoever to investors, even those with “Level 2” machines, and market makers pretty much can do what they please. If a market-making firm is selling 50 million shares per month of a certain victim company and buying only 2 million shares per month and has been doing this for several years, then this would surely be nice to know.
The tremendous amount of money involved here attracts these opportunists by the boatload. Investor naiveté is also a cornerstone. Very few people, with the exception of the perpetrators of this fraud, know how this game is played. The inherent confusion involved with millions of trades settling at any given time creates a certain cloud of dust that can obscure the perpetration of this fraud. There is no “Day of reckoning” for these trades. The IOUs just fly around in Cyberspace and never seem to land. It becomes incumbent on the victim corporations to call a “Legal time out” to get a peak at these IOUs. There is a certain psychology involved also that is inherent to some naked short sellers. They think of themselves as self-appointed sheriffs trying to rid the wild west of companies they diagnose as scams.
If their diagnosis is incorrect then it usually doesn’t make much of a difference anyway because they will bankrupt both legitimate and scam corporations. Bankrupting legitimate corporations is seen as “collateral damage” which occurs in any war. Brokerage firms hosting the accounts of “Offshore Corporations”, especially those located in the tax havens, do not follow the “Know Your Customer” rules. A commission is a commission.
The “Patriot Act” is buckling down in this regard and brokerage firms are to be on high alert for suspicious money flow activity. For those in need of laundering the proceeds of illicit activity, naked short selling provides a handy way to launder that 200% margin maintenance requirement attached to naked short sale orders for especially penny stocks.
Actually the crimes of naked short selling, wire fraud, money laundering, and tax evasion go hand in hand on these venues. Another key preexisting condition is that market makers are not forced to make public their naked short positions on a monthly basis as they must on the more senior exchanges. This is yet another example of the lack of transparency on these trading venues. As far as the Pink Sheets go, there are basically no demanding standards to match or surpass in order to be granted membership.
Another contributing factor has to do with the fact that input into the DTCC comes solely from the broker/dealers. Any picture that the brokerage firms want to paint regarding the disposition of a corporation’s shares can be painted at will. The fox is guarding the henhouse.
All of these factors combined form an environment within which this fraud can be perpetrated with very little risk of detection. If the laws were to drastically change tomorrow then these same fraudsters would just tweak their modus operandi accordingly and not even miss a beat.
THE MECHANICS OF NAKED SHORT SELLING
Referring back to the 6 steps involved in a “model buy order”, one can see the myriad of ways available to naked short sell into this purchase order. The first individual with a shot at this opportunity is the broker who gets the phone call from his client, the purchaser. There are two main modalities used to naked short sell at this level. We’ve seen where the broker himself can naked short sell into the buy order by picking up the phone and placing a matching sell order, usually through his own non-U.S. margin account, into the market at an opportune time.
The more common technique used at this level is the broker picking up the phone and telling an associate of his about the “opportunity” that has just landed on his desktop. The broker is used as a “scout” and is usually paid back for these favors by the brokerage business coming his way from those he is scouting for. Manipulations at this “Step 1” level are relatively rare but do occur especially when the broker receiving the call works in a Canadian Brokerage Firm where the naked short selling rules are more lax.
Step 2 level manipulations are fairly common and they involve the broker receiving the phone call writing up this buy order and setting it on his firm’s “trading desk”. The trader processing this buy order has 3 main mechanisms to utilize in order to avail either himself or a colleague of his to this wonderful opportunity to naked short sell into this buy order for shares of this “future bankruptcy”.
The first modality involves the trader picking up the phone to his personal broker at a Canadian firm and having him feed in a naked short sell order for a matching amount of shares at an opportune time. He can also naked short sell into the order right at his trading desk, a process called “desking”, which places the naked short position into a “proprietary account” of his own firm. This practice is almost universally done to all international buy orders. “Desking” is very commonplace. A third option would be to act as a “scout” for colleagues that would like to avail themselves of this wonderful opportunity and give them a “heads up” to the fact that a buy order is about to enter the system.
Step 3 involves a heretofore unmanipulated buy order being sent to a buying market maker from the trading desk of the firm receiving the buy order. There is an intrinsic reality in this relationship between the market maker and its client, the buying brokerage firm, that is critical to understand. The buying market makers need the order flow from the buying brokerage firms. It is their lifeblood.
When presented with a buy order, the buying market maker often has to naked short sell into the order just to keep his client brokerage firm happy with his services. The buying brokerage firm wants rapid execution of the buy order in order to get their hands on the commission. Since the stock of these companies is usually very thinly traded, oftentimes there are no sellers around to satisfy the demand for shares. The market maker is expected by his client to “perform”, which means to continuously naked short sell into buy orders presented by that client.
It is incredibly common for even the most ethical of market makers, due to this pressure to keep their clients happy, to run up immense naked short positions just in the course of their business. Their job is to provide liquidity to these illiquid markets. Where the crimes are often committed at this Step 3 level is in how the market maker handles this predicament he has gotten himself into. On the other hand, there are certain market makers that blindly naked short sell into each buy order on these trading venues that crosses their desk.
Market makers have literally dozens of ways to cause harm to these corporations that they “accidentally” ran up an immense naked short position against. These vary from continuing to naked short sell into every buy order that appears, effectively neutralizing these buy orders, to contacting naked short selling consortia to lend them a hand in killing the company. There is an endless list of market manipulative techniques to employ.
These Step 3 manipulations are the single biggest component of the overall naked short selling campaigns. Market makers are incredibly powerful in these campaigns in that they are legally allowed to naked short sell “while acting in the capacity of a bona fide market maker”. Not only this but they don’t have to reveal the size of their naked short positions to anybody. The “Short Sale Rule”, Rule 10 (a)-1, does not apply to the OTCBB and Pink Sheets. Step 3 manipulations involving these buying market makers are collectively known as “The Wall”. Very few buy orders make it over this wall and find a “real” seller.
Step 4 manipulations presuppose that the buying market maker behaved himself and went into the market and filled that buy order by approaching the market maker with the lowest offer price or a different market maker that was willing to match that lowest offer. The “Semi-ethical” buying market makers are in need of a quick “print”. They want to run the order and grab a quick “markup”. They know only too well which brokerage firms and other market makers to approach in order to get the buy order quickly naked shorted to them. Many of these public corporations’ shares are “Piggy-back Qualified”, this allows any firm to put on a “Market maker hat” and legally naked short sell without having to file a Form 15(c)2-11.
The same games are played with these selling market makers, but the height of the wall is a little less. Ethical selling market makers may or may not have a “real” sell order in hand. Oftentimes they will naked short sell into a buy order and then go on the bid to attempt to level out this now naked short position. If they accidentally dug themselves into a hole while servicing clients then they may sit on the offer all day and naked short sell into every buy order that appears. The lack of visibility that these markets provide to investors allows extremely manipulative techniques to go undetected.
Step 5 presupposes that both the buying and selling broker/dealers are not self-clearing. The clearing firms are in a unique position to orchestrate these manipulations behind the backs of
their client brokerage firms.
Step 6 manipulations occur in and around the DTCC. The back office policies at the DTCC have long been ascribed the role as the problem here. Activities at the “Lending Pool”, both of the Canadian Depositary Service and the DTCC also provide opportunities to both add yet another layer of manipulations as well as cover up earlier manipulations. All of the input into the DTCC is, of course, from the brokerage community. When attempting to drain this “lending pool” of its contents, careful attention must be paid to those shares held in Canadian Brokerage Firms because the level of chicanery here is alleged to be extremely high.
One can now get an appreciation for the nearly limitless opportunities available to attack one of these corporations during a “bear raid”. A very small percentage of buy orders actually meet up with a “real” seller selling “real” shares. There is just too much money to be made taking on naked short positions and then killing companies. From a risk/reward point of view the chance of detection is infinitesimally low and the rewards are abundant.
The ability to sell nonexistent shares in an undetected manner provides for a self-fulfilling prophecy of sorts. The victim companies find it necessary to finance their “burn rate” at artificially low levels, which leads to massive dilution. If the company were fortunate enough to actually have earnings at some point, they would be diluted so badly that it wouldn’t even matter. Of all of the varieties of securities fraud in existence, and there are many, naked short selling campaigns are usually thought of as the “manipulation of choice” providing the most favorable risk/reward ratio.
Since the “model buy order” that executed all 6 steps results in an exchange at the DTCC of cash for shares between the buying and selling firms, any “short circuiting” at any step would prevent this exchange from happening. In order to exchange cash for shares you need shares! There aren’t any when it comes to naked short selling. There never were any. The purchaser paid hard-earned cash for “air”. That monthly statement is a lie. His brokerage firm never did receive “good delivery” of a share certificate, there never was one. In fact, in the case of a Step 1 or 2 manipulation, the broker/dealer first damaged the company by artificially diluting it, and then he sold this damaged bill of goods to his client.
One might ask, “Well then where is the buyer’s money?” The buyer’s money is in the hands of his own brokerage firm. The same people he just paid a commission to and that have a fiduciary responsibility to him. Since there was no “good delivery” of shares made to the buying brokerage firm in exchange for payment, (“Delivery versus payment”), the check never left the coffers of the buying brokerage firm. There never was a “real” seller into whose pocket the cash should have gone. In Wall Street parlance, the buying brokerage firm has a “Failure to receive” on their books. All of the intermediate brokerage firms have both a “failure to deliver” and a “failure to receive” on their books except for the manipulating party itself, he would just have a “Failure to Deliver” on his books. The IOUs just travel through cyberspace and never get addressed.
Everybody owes everybody else and as long as nobody puts their foot down and demands delivery then this will be the status quo. So why don’t all of those firms with all of these “Failures” on their books rectify matters and level up their positions. “The Customer Protection Rule” (Rule 15 © 3-3), clearly states that the buying brokerage firm is mandated by law to go into the open market and buy-in that “Failure to deliver” within 10 business days of settlement. But in the case of a Step 1 or 2 manipulation, it is the buying brokerage firm itself that is the crook. How can you buy yourself in? The sobering reality is that all of the brokerage firms in their various roles in this buy transaction will make a ton of money if NOBODY forces anybody to deliver. That would wreck this whole wonderful low risk/high reward game, and nobody wants to do that.
The question now becomes, “What is that entry in my monthly statement all about if there never were any shares purchased?” We refer to these entries as “BEEs” or “Bogus Electronic Entries”. Their purpose is to give the buyer a certain comfort level so that he never suspects any fraud. It also serves to cover up the fact that the buyer’s money is actually in the coffers of his own brokerage firm, and being lent out or invested by them. The investor who bought nonexistent shares from his brokerage firm or whomever, was the victim of a “Double Whammy”. Not only did he not get the 1% ownership that he thought he was buying, he actually got a much lesser percentage of a company that he might not even recognize, one that perhaps he would have never bought the shares of if he had known the truth.
This company might have 100 million “real” shares issued and outstanding according to its Transfer Agent, but it may also have 500 million bogus electronic entries in existence. The bad news here is that all 600 million “shares” of this company can be sold tomorrow. An interesting phenomenon occurs when this investor holding the bogus electronic entry decides to sell his shares. After all his broker can’t hardly tell him that he can’t sell his “Bogus Electronic Entry” because we failed to get “Good Delivery” as mandated by law. When you want to sell, your broker is going to sell this “Bogus Electronic Entry” or “air” to some unsuspecting investor, who in no way shape or form can ever get “Good Delivery”.
The seller had no idea that he bought and sold nonexistent shares, and this process will go on and on and on. As long as nobody suspects anything and those monthly statements keep coming, then this little secret will never be revealed. The stock itself will trade like a big overweight whale, and buy orders of a significant size will not nudge the price one iota because of all of those “extra” shares that can be sold at any time. Should bad news be released a market massacre might ensue.
Typically the financiers of the company will fatigue and stop cutting checks, deeming that any more checks cut may be good money after bad. They will assume that all of that selling must be coming from somewhere and the only people that own that much stock is management, so this whole thing must have been some kind of a “Pump and dump” from the get go. Then it will be time to turn out the lights and nobody will ever know the reality of what was going on.
The transaction that this investor took part in actually created out of thin air a new million shares of stock. These shares can be bought and sold at will. They will never be detected by anybody as being fake, because of the lack of a “Day of reckoning”. The company in question will show 100 million shares being owned at the DTCC by various firms if everybody leaves them in “Street Form”.
If you, however, stack up all of the monthly statements of all of the shareholders for a given date, and add them up, you will come to the total of 600 million “shares” being “owned”, not 100 million. The absolute size of naked short positions actually have a tendency to increase in an almost geometric fashion because the larger the naked short position, the larger the potential losses to the naked short sellers should something go awry. This increases the incentive level to kill this corporation. Long-lived “Bear raids” are very scary to naked short sellers and demand special “weapons and tactics”.
The brokerage firms that perpetrate this fraud cover it up by breaking yet more laws. By law the purchase confirmation mailed to the buyer of the “shares” was to indicate to the buyer the capacity within which his broker acted. Typically the brokerage firm will act as an “agent/broker” and charge a commission.
In Step 1 and 2 naked short selling, however, the brokerage firm actually acted as a “principal/dealer” and actually charged what is known as a “markup”. If the brokerage firm were to indicate this capacity under which it actually acted, then the investor might question what this “principal/dealer” business is all about. Since the brokerage firm does not want the investor to know that they naked short sold him this “air” and that they were sitting on his money, they will just lie on the confirmation slip as to the capacity in which they acted.
The question is often asked as to when the “day of reckoning” occurs wherein these bogus entries must be made good upon. The law lists three different “days of reckoning”. The “Customer Protection Rule”, Rule 15(c)3-3, mandates that the “Failure to receive” certificated shares that were purchased in a transaction, are to be “bought in” by the purchasing brokerage firm on the 10th business day past the settlement date (T plus 3). The law also states that the selling firm in this transaction is to buy-in their client doing the selling if he hasn’t produced the certificate within 30 days of settlement.
The law further mandates that brokerage firms buy-in failures to receive and deliver within 45 days of filing quarterly reports that noted these “Fails”. With the absence of Rule 10 (a)-1, “The Short Sale Rule”, having any application to the OTCBB and Pink Sheets, the Customer Protection Rule is the only line of defense left against this fraud but it is ignored almost 100% of the time. There is just too much money to be made while ignoring it to turn down.
Investors becoming educated as to the nature of naked short selling and demanding the registration and home delivery of their shares has to be the cornerstone of the effort to end the perpetration of this fraud.
Since all 6 steps need to be completed in the “Model buy order” in order to match up a “real” buyer with a “real” seller, all of these manipulations at the various steps along the way result in the creation of new shares which exist in the form of a “bogus electronic entry”. These cause massive dilution of a corporation’s share capital, which has a depressant effect on the share price.
Since all financings of these corporations are tied to these artificially depressed prices, the dilution problem is further exacerbated. All corporations have to cover their monthly “burn rate” just to keep the lights on. This accelerated dilution rate is a constant source of discontent with shareholders. They not only see the price per share evaporating, but their percentage ownership of the corporation is also dwindling due to the artificially high dilution levels.
The resultant loss in shareholder morale throws yet more fuel on the fire of this company’s problems. Again there is a bit of a geometric progression in the company’s problems as opposed to a more linear arithmetic progression. Due to the inherent nature of this animal called naked short selling, the playing field becomes so tipped in favor of the racketeers that one wonders how any corporation could survive.
SELL SIDE NAKED SHORT SELLING
The same games can be played in the absence of a buy order from the sell side of the equation. Sophisticated naked short sellers typically work out of offshore corporations located in tax havens around the world. Banking secrecy laws in these havens help to prevent detection of the identity of the actual perpetrator of the fraud. If one is going to break 20 or 30 securities laws then one might as well do it in an anonymous fashion.
The modus operandi usually has an offshore corporation “A” setting up a margin account in a non-U.S.brokerage firm. This corporation “A” will have one shareholder and one director namely Corporation “B” from a different tax haven with different banking secrecy laws. Corporation “B” in turn will have one director and one shareholder being Corporation “C” in yet another tax haven.
For the victim company to attempt to identify Corporation “C”’s owner would now cost a fortune and take a great deal of time. These victim companies have neither. During this past February, non-U.S.regulators discovered the existence of 13,00 of these offshore corporate accounts amongst non-U.S.broker/dealers. Corporation “A” will now start selling massive amounts of the victim company’s stock. Corporation “A” will often be set up as a “Hedge Fund”.
The non-U.S.Brokerage Firm taking the sell order knows darn well that this offshore corporation doesn’t own any shares, but they can always play dumb later on should something go awry. Besides there’s some big commission money to be made. The non-U.S.Brokerage Firm will typically insist on a 150% to 200% margin maintenance requirement. The naked short selling of penny stocks is inherently dangerous and the broker/dealer needs to be protected. It is extremely easy to “Scuttle” an offshore corporation should the plan backfire and the non-U.S.firm knows this.
As far as the role of the non-U.S.Broker/dealer utilizing the lax non-U.S. laws regarding naked short selling, they have three main incentives to break the law and take the order. The first is the commissions generated. The second is the use of all of that money placed for margin maintenance requirements, and the third is the visibility of large sell orders providing opportunities for “front running”.
One technique the non-U.S.Brokerage Firms utilize is known as the “Hot Potato” technique. Firms are often allowed to keep a naked short position on the books for only a 10-day period after which fines may be levied. After 9 days a firm carrying a large naked short position can hand that position off to a “Buddy” brokerage firm like a hot potato. After another 9 days it may go to a 3rd firm or back to the original firm. If it gets too burdensome then it’s off to a friendly hedge fund for long term “storage”.
Non-U.S.OFFSHORE ACCOUNTS
Who are the typical holders of these non-U.S.margin accounts used for perpetrating this fraud? Offshore hedge funds are the most powerful of these groups. Hedge funds with less than 100 participants do not need to follow the rules and regulations dictated by The Investment Company Act of 1940. This provides both anonymity and lack of liability for the participants. Hedge funds typically contain the money of deep-pocketed players not averse to risk. Large market making firms as well as other Wall Street entities own significant positions in these hedge funds and can count on them when caught in a pinch. Hedge funds account for a very large percent of this naked short selling activity. The Senate Finance Committee is currently investigating the relationship between hedge funds and naked short selling.
Various naked short selling consortia are in existence around the world. They pride themselves on their due diligence capacities and they really are very impressive in that regard, but not infallible, which leads to significant opportunities when they do make errors. Some of these groups have their own websites and aid their disciples on the choice of non-U.S. Brokerage Firm to set up a relationship with. Usually a firm with a Head Compliance Officer that is willing to turn his head the other way a lot. These groups will typically have their head “guru” with good investigative connections as well as “street smarts”.
Recently we’ve seen a lot of activity out of Europe. Shares of OTCBB and Pink Sheet stocks actually “trade” on subdivisions of various markets over there, totally unbeknownst to management. Not unexpectedly 99% of the trades are “sells”.
One aspect of this business that has recently been revealed is how these various naked short selling groups communicate and collude with each other. If one group is having a tough time killing a company and their intent is becoming very obvious, then they will hand the baton on to their co-conspirators to help polish off the corporation. This is a very scary thought. These people are incredibly deep-pocketed in the first place.
“PILING ON/FRONT RUNNING/TRADE PADDING”
An interesting phenomenon often occurs when the non-U.S.broker/dealer first gets visibility of a large sell order. Let’s assume that it is a 20-million share sell order of nonexistent stock “at market” to be executed in two weeks time. The typical source of a sell order like this might be a market maker with a hedge fund connection that “accidentally” got into a large naked short position while servicing a valued client.
Knowing that this sell order is going to severely depress the victim company’s share price, the non-U.S.broker/dealer will often put in their own sell order of maybe 10 million shares and process it before processing the 20 million share sell order. The offshore corporation can’t exactly point an accusing finger should they detect the front running since they are breaking the law themselves. Now the non-U.S.broker will hand a 30-million share sell order to a market maker.
When the market maker sees this now gigantic sell order they will often front run this 30 million share sell order with a 10 million share sell order of their own making. They know all too well what a 30 million share sell order will do to one of these thinly traded securities. Thus a sell order of 20 million nonexistent shares has now grown to 40 million nonexistent shares.
This elucidates the “Self fulfilling prophecy” aspect of naked short selling. Unsuspecting shareholders will pay “real” money for all 40 million of those shares and not suspect any hanky-panky at all. How could a monthly statement from one of these prestigious Wall Street firms be telling a lie?
Thus naked short selling can work from left to right through the various steps involved in the processing of a buy order, in essence “neutralizing” the up ticking effect on share prices caused by buy orders, or from right to left with the introduction of massive sell orders of nonexistent shares.
DEATH SPIRAL FINANCINGS/TOXIC FINANCINGS/FLOORLESS CONVERTIBLES
A close cousin of naked short selling involves a form of predatory financing called “Death Spirals”. Companies in dire need of financings are often forced, by necessity, to trust that financiers will not pre-sell their equity financings in an effort to clobber the market and then convert for a very large number of shares at artificially low prices. These financings are based on fixed dollar amounts of conversions and not a fixed number of shares. A riskier form of death spirals involves potential financiers dumping tons of shares before even cutting a deal for a financing. Conventional death spirals are actually a form of “temporarily naked short selling” because the shares are forthcoming but usually restricted by Rule 144.
RECENT DEVELOPMENTS WITHIN THIS “INDUSTRY WITHIN AN INDUSTRY”
Within the past two years the world of naked short selling has been changed forever. Four separate events have rocked the world of the naked short sellers. Since the secrecy of the modus operandi is so important to these people, the headlines caused by these Four events is not welcome at all by the perpetrators.
The first event was the arrest of Anthony Elgindy and the exposure of his methodologies of naked short selling utilizing the services of two allegedly corrupt FBI agents. Elgindy and his huge following have allegedly been one of the pillars in the naked short selling community.
The second event was the sudden bankruptcy of the non-U.S. Brokerage Firm which has been the alleged “headquarters” for naked short selling worldwide.
The third event was the arrest of the CEO of this firm for attempting to naked short sell $30 million worth of three companies’ shares to an undercover FBI agent. The fourth event was Operation Uptick, revealing the incestuous linages between organized crime and reputable brokerages in the U.S. The “Winds of Change” do seem to be blowing a bit, and it wouldn’t take much of a breeze to knock down this “House of cards” the naked short sellers have built.
The significance of these events is not just getting these individuals and institutions out of commission. The real importance is the education that the public needs to receive in regards to naked short selling as these trials and bankruptcies go forward. Again the secrecy factor is the key to naked short selling. If the investing public knew what was going on behind the scenes on the OTCBB and Pink Sheets, then the uproar caused could mushroom into a total lack of confidence in this system, which is already on its knees after the Enron and Anderson debacles. If this knowledge did become commonplace, then at least one of the main two prerequisites, that of not registering and demanding delivery of shares, might be eradicated.
Several non-U.S.Brokerage Firms were recently sued by clients for not delivering the share certificates that he had demanded the delivery of. He had obviously been naked shorted the shares by both firms. In their statement of defense, the attorneys for the firms claimed that it was the actual client of theirs doing the naked short selling that owed the share certificate to the client/buyer and not the firm. The Customer Protection Rule would obviously beg to differ. This is a typical example of the mentality of the non-U.S.Brokerage Firms.
The non-U.S.Regulators have “lowered the boom” on the behemoth BMO Nesbitt in regards to “Serious Know your client deficiencies” and “Failure to supervise brokers”. Many of those 13,000 “offshore corporate” accounts have tens or even hundreds of millions of dollars playing the naked short side of the market. A broker managing these accounts is supposed to look into the sources of these funds to rule out any illicit activity like money laundering.
In the U.S. the Patriot Act demands that brokers scrutinize these funds and file “SAR”s (Suspicious Activity Reports”) when illicit behavior is suggested. This was implemented mainly as an anti-terrorist funding measure, but hopefully will spill over into keeping in check naked short selling. The dynamics of bringing to the public’s attention this insidious disease of naked short selling, has never been more exciting than at the present. The public is being immersed in learning the mechanisms of action of the Elgindys, the Valentines, the Thomson Kernaghans, these 13,000 offshore corporate accounts, money laundering, tax evasion aspects, etc.
LONG TERM SURVIVORS
An important aspect of these naked short selling wars is the length of time that the victim company has been under attack. When these naked short selling “gurus that can smell a scam from 40 miles away” guess right and beat up a scam company, the company doesn’t have a chance because of the vicious nature of naked short selling. The lack of assets of the company will be exposed and announced from the mountaintops.
What are interesting are the battles that ensue when these “gurus” misdiagnose a “real” company with “real” assets as a scam. The naked short sellers will still be able to knock the market cap down by 99%, but often it becomes tough to “Kill” the company. Investors that know that the company has the goods can sit back and buy shares at a tiny fraction of book value and thereby average down their previous purchases. Since the size of the naked short position is of a cumulative nature, increasing with the age of the battle, a point is reached wherein the naked short sellers cannot afford to cover this massive naked short position without driving the share price to the moon. This is when the games get really dirty because hundreds of millions of dollars are now up for grabs, winner take all.
THE DAMAGES
One has to wonder how many young micro cap corporations with great promise have been snuffed out while in this incubator of the OTCBB and Pink Sheets. Have we missed out on any potential cures for cancer or high tech breakthroughs? What happened to the dreams of all of those entrepreneurs who put every penny they had into their private companies in preparation for going public, and then getting massacred once public?
RECORD KEEPING AT THE DTCC
For an annual fee of $1,850, a corporation can receive from the DTCC a weekly update as to the number of shares that each of the brokerage firms on Wall Street have for a given corporation in their “Shares” account. Keep in mind they all have “cash” accounts also. The problem with these lists are two-fold. They only reflect the number of shares for which “Good Delivery” was attained. They also don’t address whether or not that brokerage firm owes any shares to a common “pool” of shares there available to any broker/dealer in need of quick shares. If for example the weekly DTCC Summary states that a broker/dealer has 1 million shares of a given corporation’s stock in their account, this must be compared to the sum of all shares being reflected as owned in the monthly statements of that firm as mailed out to their client/shareholders. Let’s assume this total is 4 million shares. The difference between these two figures can be characterized in several ways. The difference represents: 1) The naked short position of that firm, 2) The number of shares bought by that firm for which “Good delivery” did not occur, 3) The number of “Bogus electronic entries” that firm has on its books and that gets mailed out every month.
Wall Street can camouflage very well the number of shares represented by the sum of all shares being reflected as owned in monthly statements. An indication of this number can be attained by a corporation receiving its “NOBO” list or list of non-objecting beneficial owners. To this number must be added the number of shares owned by “OBO”s or objecting beneficial owners. When a person signs up for a brokerage account he is asked to check a box denoting whether or not the company in which he owns shares of has the right to know of his shareholdings. If he does not object to this, then he is a “NOBO”. The “NOBO” lists are available from ADP Brokerage Services Group at 1-888-237-1900.
When a person adds the total shares held of a given corporation at the DTCC to the number of shares held by “Registered” shareholders in safe deposit boxes, the sum will equal the issued and outstanding number of shares of that corporation exactly. So at first glance, all seems to be in order until you realize that the DTCC list only represents “Good deliveries” which on these trading venues is the exception and not the rule. And so the fraud is perpetrated on and on and on.
In regards to the “Pool” of shares held at the DTCC that is available in the case of an emergency, this was allowed by Addendum C- (1) of the NSCC’s (National Securities Clearing Corp.) rules and regs. They were taken over by the DTC several years ago, the amalgamation of which formed the DTCC. The Lending Departments of a firm monitor things here and are one of the biggest profit centers in any firm. From a practical point of view, until this pool is 100% empty of shares, don’t expect any upward pressure on share prices due to the borrowing ability provided by the pool. Once it is empty, however, each further demand for the registration and delivery of shares should theoretically cause a forced buy-in of shares under a “Guaranteed Delivery” basis.
It is relatively easy to empty out the “pool” at the DTCC. If a company has 70 million shares at the DTCC and a naked short position of 500 million shares, then all the company has to do is create a situation that withdraws 70 of 570 million shares available to be withdrawn. As was stated earlier, all of the brokerage firms represented along the chain of events of one buy order are HIGHLY incentivised not to demand the correction of those “Failures to receive and deliver”. In order for this to occur, the shareholder and the issuer must be educated as to how this game is played
Posted by: righty
In reply to: None
Date:4/11/2007 11:20:30 PM
Post #of 1187
USXP (.001) Exposes Trillion Dollar Tax Scam
Market Wire "US Press Releases "
NEW YORK, NY -- (MARKET WIRE) -- 04/10/07 -- Universal Express Inc. (OTCBB: USXP) CEO, Richard A. Altomare, today presents estimated tax losses to the United States Treasury of over $1 Trillion Dollars due to naked short selling.
"The facts are simple. Sell a stock you do not own. Push the share price down. Force the Company to fail. The failed stock never has to be purchased, and since there is no mandated buy-in after a company fails, almost everyone loses, the employees, the shareholders and now the Federal Government. It's a tax free way of making money," said Richard A. Altomare, Chairman and CEO of Universal Express, Inc.
"To be more specific, this loophole benefits market makers, hedge funds and maybe even the funding of terrorist cells. Our national debt and the Iraqi war could have been paid for with the elimination of naked short selling or a mandated stock buy-in after shorting.
"Once again I call upon our elected officials to address the problem prior to the SEC's efforts to pretend they're fixing a broken system. As they attempt to silence those of us who speak the truth, I ask you to examine the profits, the bonuses and the salaries of those stealing not only from individual companies, but from every hard working American taxpayer," continued Mr. Altomare.
"With all those in Congress looking for an issue worth supporting, how about documented tax fraud in the trillions?
"Courage is required and our Country and American investors have been stolen from far too long. Where are those real leaders worth following?
"I'm tired of hearing how much money a candidate raises. Let's rally behind one who shines a light on a practice that is raising our National Debt, raising our taxes, and raising our cost of living," concluded Mr. Altomare.
About Universal Express
Universal Express, Inc. is a 23 year old logistics and transportation conglomerate with multiple developing subsidiaries and services. For additional information please visit www.usxp.com.
Safe Harbor Statement under the Private securities Litigation Reform Act of 1995: The statements contained herein, which are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements including, but not limited to, certain delays beyond the Company's control with respect to market acceptance of new technologies, products and services, delays in testing and evaluation of products and services, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.
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Contact Info:
Mark Falk
Universal Express, Inc.
561-367-6177
Email Contact
Posted by: uwlungman
In reply to: None
Date:4/9/2007 12:27:21 AM
Post #of 9596
Excellent interview on naked short selling...
You can read the transcript or listen to the interview (long but a "Must Read" IMO)...
http://financialsense.com/transcriptions/2007/0331.html
Posted by: DTL
In reply to: None
Date:3/20/2007 9:10:00 AM
Post #of 5749
If you haven't read this, and wonder what is happening to XTMS, I encourange you to compare what is written here with what you are observing on XTMS.
Advanced Small Business Alliance (ABSA) Position Paper
SHORT SELLING COMBINED WITH FRAUDULENT STOCK MANIPULATION
Submitted by Gregory J. Halpern – CEO, Circle Group Holdings, Inc.
Mr. Halpern is the Director of the Midwest Regional Chapter for the CEO Council
August 12, 2005
Small Business Hurdles
The millions of small business professionals that own and operate small companies in this country produce a majority of America's private gross domestic product, most of the taxable revenue to the treasury, and most of the new jobs every year. Between 1990 and 1995 they created 76 percent of America's new jobs. In 1998 alone, this sector created 31 million new jobs in nearly 900,000 new companies. And this trend is expected to continue. A crucial component of our domestic economic engine is the ability to create funding through access to the capital markets. Everyone who owns or runs a publicly traded small business knows the hurdles that they must overcome in order to make their business successful, including obtaining funding, completing all of the regulatory filings, competing for market share, and compliance with Sarbanes-Oxley with the outrageous cost burden it imposes, to name a few. Small public companies, and many others with the goal to get to the capital markets accept all of this, plus long hours, late nights, and weekends as what it takes to grow their business, improve the world with their products and services, and create wealth for themselves, their employees, their shareholders and the economy.
But small public companies and their shareholders are facing a severe problem, and they are looking to the Securities & Exchange Commission, the Justice Department, and the F.B.I. to help them get urgently needed relief. The problem is that short selling is being intentionally combined with fraudulent stock manipulation to destroy the value that small American businesses in the capital markets work so hard to achieve. The points contained in this position paper have tremendous merit for all small public companies but it must be pointed out that it was written with a bias because our company, Circle Group Holdings, has been under constant attack from a well-organized group of criminals for over a year and a half. Our management team and employees, who are all owners of the company’s stock, are tenacious, tough minded, fighters of injustice, with multi-faceted business experience and backgrounds in martial arts. Thanks to our intestinal fortitude learned from these backgrounds, we have survived the attacks, and fully expect to survive any additional attacks. From early 2004, until the present, Circle Group has successfully battled its attackers by getting several public web sites and chat boards to remove malicious phony content, getting a protective court order and winning motions on cutting edge Internet jurisdiction issues. We found out through this experience that one of our attackers is now a defendant in other securities matters and is currently being prosecuted by the SEC for another unrelated stock fraud. Tragically, many other small public companies have gone out of business. Still more will not survive the attacks or mount any serious defense against the perpetrators who work in hiding, often live and/or operate off shore, have completely phony identities and are cloaked by the anonymity of the Internet.
For additional perspective our company, Circle Group Holdings has a legitimate natural food technology solution for obesity called Z-Trim that was developed at the U.S. Department of Agriculture over many years with significant amount of taxpayer dollars. Many anonymous attacks have been made against the company and its personnel in particular saying that Z-Trim is a scam. Except for bashers, no one on the planet has even suggested that Z-Trim invented by one of the world’s most influential agricultural scientists, is a bad invention. Yet the bashers who attack the company, post numerous outrageous lies about Z-Trim. It is amazing that the number one health problem in the world today is obesity, and this outstanding technology could reverse the course of this devastating disease, yet here is this group of criminals posting lie after lie with their only goal to destroy the value of the company’s equity and shareholder value. Many innovations and inventions that could have benefited humankind will never get to market because of the companies that were destroyed by these criminals.
When just looking at approximately 5000 small and micro-cap companies that have an average issued and outstanding share total of 40 million shares, and multiplying that by an average $5 loss on share value, we estimate the losses to investors to be at least a trillion dollars annually. The number is probably a lot higher when you factor all the other companies attacked and then lost jobs, potential new economies of scale that never develop, lost capital markets formation, increased cost burdens on government and families to support those individuals wiped out, lost individual and corporate taxable revenue to the treasury, lost improvements to our lives from innovation that does not occur, and lost investor confidence in the emerging markets as well as erosion of the American Dream.
Therefore, the primary objective of this Position Paper is to provide valuable information and suggestions that if heeded, and if existing laws are enforced, will help countless companies and their shareholders avoid suffering this fate in the future. Without help, many companies will not survive, and many more will have their shareholders’ value severely damaged. The criminals who perpetrate the attacks being discussed here are bold, well organized economic terrorists who commit securities fraud daily, without punishment, and who benefit immensely from the technological advances of the Internet and the economics of regulatory authorities who are challenged to justify the cost of pursuing these crimes. After a miserable half decade in the capital markets, if the economy is to ever improve in a noticeable way, this problem must be fixed. While serving large corporations to better prevent rampant fraud exposed in recent times, Sarbanes has not served small business in any way to restore investor confidence in the market as evidenced by the lack of capital market investment and investors continued knee jerk reactions to nearly every piece of daily news. The good news is that the legal system in place, if utilized as suggested herein, already provides the ability to remove most of the current network of criminals from the capital markets and restore investor confidence, thereby stimulating many other areas of our economy.
The Growing Problem
Unscrupulous speculators have found ways to short stocks and then manipulate companies stock prices lower by continuously attacking the companies on Internet financial chat boards, websites, and through other highly illegal and unethical means. Agents for competitors or shareholders of competing companies’ stocks may also make these attacks for obvious reasons. The bloggers and bashers spend their days, nights, and weekends, viciously attacking the companies they short with continuous false disparaging chat board posts about the companies, their management, employees, products and investors. Some of these shorting syndicates and other bashing groups are well organized, but all have one goal in mind, posting defamatory negative false or distorted information in an effort to severely damage a company’s reputation and stock price. Some bashers also utilize so-called “watchdog” websites to attack companies, but only after alerting their subscribers that they are going to issue a negative report about a targeted company. This gives their subscribers the opportunity to get a solid short position before the attack begins, thus creating additional short or negative pressure on a stock. These activities constitute securities fraud.
One listed company sells a homeopathic medication to reduce the duration of the common cold. The company was attacked by a group that called for a class action suit for users of the product who suffered a loss of smell from using the product. A website posted this information encouraging people to contact them to discuss potential legal actions against the company. A Dow Jones newswire article reported on these so-called consumer complaints about the product and their loss of smell. The company has given assurances that it adheres to FDA guidelines and restrictions and was unaware of an FDA inquiry into the safety of their product. As a result of the group that attacked them and the news articles that followed, the company’s stock price began to drop, and kept dropping until their market cap was cut to less than half. The number of people who signed up to be a part of the class action suit against the company turned out to be only two, a husband and wife. They both claimed to have some loss of smell from using the product, but only after the website and news article came out. The stock recovered some of its huge drop once people realized that the claims made against the company weren’t what they first appeared to be. Unfortunately, the stock price has only gone up to a portion of what it lost, and the shareholders who lost in excess of several hundred million dollars are the ones who suffered as a result of this.
How They Operate
The criminals are short-selling bashers, and illegal stock manipulators, who repeatedly post outrageous known lies or distorted half-truths with a dogged determination and single-minded purpose – use any means possible to drive the stock price down.
In the small and micro cap market, most increases in value to a stock occur when more people buy more shares. Any such occurrence will automatically result in relentless postings that the company is a pump and dump scheme. The bashers will post as many as a dozen posts at a time under multiple aliases in order to dominate a chat board. On some message boards that give you the option, they continuously post under multiple aliases with a strong sell sentiment, even if they may only post about the weather or some other nonsense post, so that a person visiting that chat board would see an overwhelming majority of the posts and posters with a strong sell sentiment. They disparage the company’s products, employees, management, business plans, and anything else about the company so they can create serious doubt about the company in the minds of investors and potential investors. They post their opinions but make them appear to be facts. They make very slanted interpretations of anything the company does as if they were giving an expert analysis, with their conclusions always being the most negative they can be. When the company issues a positive press release, they state that the press release is all hype, released only to increase the stock price. If an insider makes a sale or exercises an option, they post false claims that management is dumping the stock because it is getting ready to drop. They ask questions about the company and its products such as: “What studies have they done to prove that their products are safe?” and “What’s to say that their products don’t cause cancer?” and “Don’t you think that the SEC should look into the way this company does business?” All comments made are negative or are cleverly and carefully worded posts intended to damage the company, by either giving people the idea that the company’s products are unsafe or cause cancer, that the company’s management is incompetent or dishonest, or to make people think that the company is doing something illegal and needs to be investigated by the SEC.
Honest investors, who happen upon the board, will often get buyers remorse from seeing an overwhelming negative sentiment and immediately “panic sell” the stock, which creates additional downward pressure and serves the criminal campaign well. Occasionally, an investor will attempt to say something positive about the company, but the resulting attacks on them will be vicious, thereby hurting their confidence in their investment decision and causing them to promptly abandon the board and usually the stock altogether. They simply do not realize that the bashers are on the board 24 by 7 because that is their job. That is how they earn their living.
There is No Limit to Their Efforts
There is no limit to what the bashers will do to try and drive down a stock price. They constantly make statements about how bad a victim company is managed or how incompetent it’s CEO is and call for shareholders to ask that the CEO be replaced. Another common practice is to make harassing phone calls to a company’s customers and suppliers and flood them with negative questions and comments about the company, its products and its management in order to damage the business relationships that it has with these companies. This practice has and will continue to destroy many new, existing, and developing business relationships. Bashers make posts about forming shareholder class action lawsuits against management and directors and intimate that the SEC should be investigating the company for fraud and lots of other securities violations. They encourage investors to contact the SEC about all of the supposed improprieties of what they refer to as the “pump and dump scheme” company.
Bashers will also send messages to the SEC, and other government agencies that might affect a companies’ business, with accusations of wrong doing by the company, and its officers and other employees. As a result, a company might get an inquiry from a well-meaning employee of the Better Business Bureau, FDA, NASD, the exchange the company trades on, or various others. Even though the company is able to answer such an inquiry, for a small company this is time consuming, costly, and diverts valuable limited resources away from the company’s actual business all to the gleeful delight and self serving interest of the criminals while assisting greatly in the success of the illegal manipulation.
Bashers post predictions of a much lower stock price in the near future to convince existing stockholders to sell so they don’t lose all of their investment. They make statements on a regular basis about the company being de-listed or going bankrupt, and they attack any shareholders that try to post anything positive about the company in an effort to defend it against the bashers. One website targeted companies by posting press releases about their victims, and misrepresenting them to look like they were produced by the SEC. That same website posted information that made it look like every company it reported on had their trading suspended or was being investigated by the SEC. The owner of the website is being prosecuted for securities fraud on another matter. As a result of those postings, each company’s stock price dropped dramatically. Why do the bashers do this? They do it to scare as many potential investors as possible away from purchasing the stock, and as many existing shareholders as they can into selling the stock in order to drive the stock price down. Again, as you can start to see, it all has a premeditated and cumulative negative effect.
Companies Are Slow To React
Companies that are attacked in this manner will often times ignore it at first, as just some disgruntled former employees. Depending on how aggressive and coordinated the bashers are, a targeted stock can drop quickly. The companies must then take notice and deal with the problem. They will get calls on a daily basis from shareholders that want to know about all the negative things that have been posted about them, and why the stock price is dropping. They want to know if the SEC is really investigating the company, or if there are class action suits pending against them or if their products are safe or not. The companies will then have to be in the business of following the various chat boards to see what is being said about them so that they can respond to their shareholders and potential investors that call them. This is not only an added expense in time and money for the company, but it also distracts them from the task of building their company and running the day-to-day operations of their business.
Companies that try to defend themselves through legal means will face still higher costs and an even greater waste of resources that make this activity difficult and expensive. Regardless, nearly every activity the bashers undertake is illegal, not policed, and designed to be totally self-serving and cumulative – and it almost always works. But when it doesn’t work enough to destroy most if not all the value, more bashers will be employed to expand the fraud by making the population of unhappy investors look even larger.
As the stock depreciates, the funding that most bootstrapping entrepreneurs need to grow their emerging businesses dries up, even though the extreme costs of being a public enterprise do not decrease. This leads to the loss of jobs, GNP, additional erosion of investor faith and the decline of economies of scale.
The Deck Is Stacked Against Small Business
The bashers claim to be protected by freedom of speech under the First Amendment. The problem with their argument is that what they are doing is illegal and fraudulent stock manipulation at the criminal level, defamation and tortuous interference with business relationships at the civil level. Chat board providers claim immunity from prosecution in anything relating to what is posted on their chat boards. In the late 1990’s, in an effort to allow free flow of content in the Internet, the Communications Decency Act, was enacted to protect Yahoo, AOL and other web portals from liability whenever posters put up content that was illegal, immoral or otherwise objectionable. So for example, if our children chatted with a masquerading Internet predator or saw pornography on an AOL website, then AOL would not have any responsibility.
The Act is now a shield of immunity for internet service providers and message and chat board companies that shy away from the moral responsibility due solely to the costs and resources they claim are needed to remove illegal, fraudulent, defamatory or otherwise destructive content. They have abuse departments who can only be contacted by email, and that only very selectively take any action against posters for violating their terms of service policy. Basically what it has turned into is an environment where anyone can post anything they want about a company no matter how far from the truth that is, and the company has very little, if any recourse against the anonymous person. Yet such a post can cause severe damage to the company and its future.
Anonymous and Untraceable
Bashers can work alone or with other bashers to attack a company, and post their attacks using multiple aliases to hold a conversation that appears to be among more than one poster, in order to give visitors to the chat boards the impression that there are many people sending these doomsday messages, and giving the attacks the appearance of credibility. The bashers use multiple aliases, anonymous email accounts, roving IP addresses and public access points, as well as other methods to avoid being traceable. Here are some of the comments that were made on one of the basher websites.
“Don't even bother trying to ID the account. It was created at the New York Public Library, Fifth Avenue location, and is only accessed through proxy servers.”
“Who are we? Your worst nightmare! “
”Imagine an anonymous team of professional researchers and writers with a network of mainstream contacts and all the investigative tools the Internet has to offer digging into your scam. Imagine a flash mob featuring you popping up overnight at twenty anonymous sites and sent to major news services via a news feed.”
”Here we are. And with anonymous proxy servers and public hard-wired and wireless Internet access points, there isn't a damn thing you can do about it. By the time you intimidate one of our free host sites to kill a report; it has been copied and mirrored ten times.”
There are also websites set up that offer to drive a company’s stock price down for a fee -
NEW FROM FAKE - THE "DEATH STAR" FAKE's Bulgarian programmers have finally perfected the ultimate weapon of stock mass destruction. Basing their model on former Blinder and Robinson Broker Wendy Gordan of South Florida, FAKE has produced the last word in piss poor pump bots. With an unprecedented record of thirty total price collapses and massive reverse splits, put this MOAB of pump bots to work for you today! Wondrwen can drive a price to zero bid in three months or less, guaranteed by FAKE.
FAKE's business philosophy is simple: We are in it for the money. Period. We don't care who gets hurt, what companies get destroyed, or what innovative or lifesaving products never see the light of day!! We are here to get ours, and yours. FAKE the rest of them!! That is the attitude customers appreciate from a professional paid basher organization.
Why Have Financial Message Boards?
Message boards such as Yahoo, Raging Bull, and Silicon Investor give investors the opportunity to share their views and comments as they may relate to specific stocks or general investing. But they also allow disgruntled former employees, competitors, stock manipulators and others to post their negative messages. In many cases these negative posters have "shorted" a stock and want to do all that they can to see the stock price move downward. Negative posters usually don’t work alone. They team up with other “bashers” and gang attack a company.
The ISPs, and message and chat board companies have the best of both worlds. They are essentially immune from prosecution for any content that is posted on the websites or servers that they control, but they reap the benefits from all of the ad and other revenue that is generated by the banner and pop-up ads and services that appear or are offered on their websites and message and chat boards. This lack of accountability is a conflict of interest and needs to be remedied. The conflict of interest is very apparent when abuse complaints that are made by individuals and will they actually do anything to remove the abuse, even though they have this as an option as spelled out in their companies for posts that violate a provider’s Terms of Service Policy pass with no action to remedy the abuse. They send auto-reply emails which tell you to use their profanity filters, or to put the posters on an ignore list, but very rarely Terms of Service policies.
A Call For Help
Some will say that people don’t pay attention to chat boards, but they do. Ask some shareholders if they ever go to financial chat boards. You will be surprised by the number of people that do. The plan of the basher is to create havoc and cause sincere investors to lose confidence in the targeted companies. One poster we identified has made over 70,000 posts attacking various companies and hurting shareholder value. These bashers know that nothing will happen to them for doing this, and they feel that they are protected by the anonymity of the Internet, Freedom of Speech, SLAPP legislation and Internet jurisdictional issues, so they continue their relentless illegal attempts at manipulating stock prices of small businesses across America. Posting negative information about a company on public message boards isn’t illegal. However, intentional misinformation is actionable by governmental authorities, whenever it affects the trading price of a security. When contacted about this problem, the FBI said that they understand and are well aware of this problem. They explained that they have successfully prosecuted such cases but at too high of a cost and without recouping of significant monies afterward to warrant future action. Actually, their main focus currently is identity theft, which admittedly is a huge problem.
These bloggers and bashers for the financial gain of criminals and the support of economic terrorists are intentionally damaging shareholder value. This activity is illegal and needs to be stopped immediately to restore the smaller capital markets. This will in turn lead to the eventual and positive restoration of the overall capital markets and then finally the overall economy.
With this Position Paper we respectfully request that the SEC, in conjunction with all other state and federal law enforcement agencies, utilize the laws that already exist and are available to make the pursuit of these criminals a top and immediate priority. Companies with chat boards and phony web sites need to be forced to remove false content and turn over all records related to those individuals. We ask that the SEC expose, prosecute and convict these cyber criminals; it is the correct legal and moral activity to undertake at this time. Publish their real names on lists similar to what is now done with convicted child molesters so that service providers can guard against such criminals in the future. Making examples of the current batch of stock fraud cyber criminals, and then keeping the boards clean in the future, will have a profound positive effect on the capital markets and ultimately the economy. Although there are many phony web sites, there are truly only three influential chat boards where the problems are proliferated as described above. Yahoo alone receives, and profits immensely from over one hundred million investor hits per day, so putting pressure on them will cause its management to be influenced into becoming responsible for the crimes committed without hiding behind the CDA. Investor confidence needs to be restored, and this is one problem that has to be addressed and remedied in order for that to happen. Small public companies need the SEC’s help in this matter immediately to put these criminals out of business. Contrary to administrative sentiment, it would take very few resources to fix this problem. The criminals engaged in this activity are certainly cowards, as they do everything they can to retain their anonymity. For the reasons mentioned herein, it will require only a small amount of low budget intervention and prosecution by Federal authorities to insure that criminals are not so brazen and eager to attack small public companies in this manner in the future. Only then can the goal of efficient small company capital formation be achieved.
http://www.advancedsmallbusiness.org/positionpaper.htm
Posted by: rrufff
In reply to: Creede Bighorns who wrote msg# 1309
Date:1/28/2007 8:07:47 AM
Post #of 1311
Hi Creede, thanks - this post of mine includes 3 citations to articles over the past week which highlight the problems in the system, including the issues of hedge fund manipulation, destrution of voting power by shareholders, etc. I think each is a must read to understand how badly the system works. After one reads a few of these, one walks away wondering why the system isn't scrapped and started anew. The SEC theoretically has learned a lot since the 30's and technology would provide a basis for a more fair and effecient market.
http://www.siliconinvestor.com/readmsg.aspx?msgid=23228077
Posted by: eatyourshortsms
In reply to: jrdig7 who wrote msg# 27520
Date:1/10/2007 1:31:30 PM
Post #of 27523
Jeff, Try this again! If not I included the article!
http://www.marketwatch.com/news/story/story.aspx?siteid=mktw&guid={26315171-03F1-485E-BFC7-B58F5....
Sandell gets Wells Notice from SEC: sources
Hedge-fund firm probed over possible 'naked' short selling, report says
PrintE-mailDisable live quotesRSSDigg itDel.icio.usBy Alistair Barr, MarketWatch
Last Update: 3:35 PM ET Nov 1, 2006
SAN FRANCISCO (MarketWatch) -- Sandell Asset Management, a big hedge-fund firm that trades on the outcome of mergers and acquisitions, could face a civil lawsuit from the Securities and Exchange Commission over its trading in shares of lender Hibernia Corp., according to two people familiar with the situation.
Sandell, a New York-based firm that oversees the $4.5 billion Castlerigg Master Investments fund, received a so-called Wells Notice from the SEC recently, the sources said, on condition of anonymity.
A Wells Notice apprises recipients that the SEC staff has recommended civil legal action and gives them a chance to respond before the agency moves forward.
A representative at Sandell didn't return a phone message left Wednesday afternoon seeking comment.
The SEC has been probing Sandell's alleged use of "naked short selling," Bloomberg News reported Wednesday, citing unidentified investors who said they had received a letter from the firm explaining the situation.
In a typical short sale, traders sell borrowed shares and then -- if all goes according to plan - buy them back at a lower price and return them to the lender. The difference is kept as profit.
In naked shorting, a trader shorts a stock without first making necessary arrangements to borrow shares. That means the seller often fails to deliver the stock to the buyer and the trade can't be settled, running afoul of securities laws.
Naked short selling has become the focus of a looming legal battle this year between short sellers and law firms representing companies that claim they've been the victims of improper trading. See full story.
Regulators, such as the National Association of Securities Dealers, have been cracking down on naked short selling this year.
If the SEC takes action against Sandell it would be the agency's first naked-short-selling case since Chairman Christopher Cox spoke out against the practice during a speech in July, Bloomberg noted.
Sandell was founded in early 1998 by Thomas Sandell, a former Bear Stearns (BSC : The Bear Stearns Companies Inc
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BSC165.40, +0.15, +0.1%) risk-arbitrage trader who was once a top-ranked badminton player in his native Sweden.
While trading on the outcome of mergers and acquisitions, the firm sometimes takes activist positions to spark financial and structural changes at companies. Sandell joined Nelson Peltz's Trian Group in its proxy battle against H.J. Heinz (HNZ : H.J. Heinz Company
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Everyone should watch this documentary, imo. http://video.google.com/videoplay?docid=-4312730277175242198
hi bill what ya been doing for kickers?
Posted by: fwayneh1
In reply to: None
Date:11/2/2006 5:07:38 PM
Post #of 13967
If we want reform in the market, SIGN this petition for starters.
At the very least, read it carefully and you'll learn why most small retailers cannot/will not make much money in the American markets. We're all literally being robbed. (Duh !!)
http://www.petitiononline.com/mrktrfrm/petition.html
And while you're at it...help by re-posting this message on every stock bulletin board you can find.
Read the whole story here (if you haven't already):
http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/503/Default.aspx
Have a fire extinguisher handy. You may get so mad, your hair catches on fire.
Posted by: PowerPole
In reply to: None Date:10/26/2006 3:01:37 PM
Post #of 30057
OT SEC investigated.......at last!
http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/495/Default.aspx
SEC To Be Investigated By GAO
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 10/26/2006 5:48 AM
Well, for those who felt that the SEC would continually get away with murder, operating like a fiefdom above accountability to anyone, free to ignore the basics of due process, the rule of law, responsible regulation, etc....News Flash!
The SEC is going to be subjected to the scrutiny of the GAO.
This just in from Bloomberg.
The Mack investigation is the catalyst - Senator Grassley's lack of satisfaction by the SEC's responses, and the growing sense that the SEC has become a captive regulator, co-opted by wealthy and powerful special interests on Wall Street (many of whom routinely violate the rules and break the law, as evidenced by the wrist slap fines the SEC tosses around whenever years of larceny are discovered at the largest players there), and completely uninterested in quaint notions like investor protection or anything in the public interest.
Readers of my blog can attest first-hand to the seeming complete disregard for investor protection that the SEC has demonstrated in naked short selling abuse. The prevailing attitude of the Commission was best summed up by Commissioner Annette Nazareth's high-handed and dismissive statement when confronted by the news that many Reg SHO stocks had suffered massive bear raids, resulting in 50% or greater declines since going on the list and Reg SHO's implementation a few months prior. Her sentiment was that those complaining were just disgruntled bad sports, pissy their stocks had gone down - essentially, degenerate gamblers annoyed over their bad bets.
That said it all for me. Told me everything I needed to know.
The SEC is broken, and needs to be dismantled. It fails in its essential purpose - to protect investors from the predation of Wall Street, and keep that body's larceny in check. If anything, the Commission is now a silent partner in the worst abuses against investors, and actively aids and abets the most blatant and brazen acts of crookedness - occasionally attempting a pretense of effectiveness by levying a fine akin to demanding the industry's spare change.
We have long been calling for a special prosecutor. Perhaps this is the first step in that badly needed direction. The laundry list of egregious offenses is long, and rather obvious. It shouldn't be too hard for the GAO to read the plain language of the 1934 Securities Exchange Act and contrast it against the behavior of the SEC, and the absurd rules it has promulgated.
It is impossible to explain Grandfathering as anything but a hall pass for the worst violators of delivery rules - there is no investor protection in that, unless one defines "investor" as "Wall Street stock manipulator" and "protection" as "safeguarding illegally generated profit at shareholder expense." It is impossible to interpret Section 17A's mandate for the prompt clearance and delivery of shares in the manner that the Commission has, unless one is deliberately trying to ignore the delivery part of the requirement, and pave the way for the industry to institutionalize fraud. It is impossible to frame the options market maker exemption as consistent with investor protection, unless one is trying to claim that derivatives speculators are the investors the 1934 Act was intended to protect, and stock investors are their intended prey, to be abused in whatever manner is required for the options market to have the most lucrative trade. It is impossible to hear the SEC's now well-established lie about how "Reg SHO is working" and be even passingly familiar with the actual numbers of FTDs via the FOIA data, without comprehending that our securities regulator is lying, regularly, to the public, in order to cover its ass, and to protect Wall Street's lucrative business of defrauding the American public - taking money, and failing to deliver the goods.
I could go on and on. The Aguirre matter merely highlights an out-of-control agency doing the bidding of those it was established to police. The SEC was set up after the Pecora hearings gave the country a thorough understanding of how the most venerated names on Wall Street had behaved worse than the most base criminals of the day. It came into being after the 1934 Act was passed, which strove to stop the worst of the larceny that characterized the markets, and the behavior of the brokers, banks and stock pools (hedge funds) that dominated the business. That the SEC has promulgated rules that ignore, or worse yet, are in conflict with that Act, typifies the problem. In a nutshell, the SEC behaves like Wall Street's propaganda arm combined with its own private security force, where fanciful ideas like self-regulation and honor systems are formalized with a straight-faced gullibility by our regulators.
How did allowing an industry that had been shown to be a snake-pit of crookery to operate on the honor system become the prevailing wisdom? How did abdicating outside policing of the most important elements of the market protect investors? How did steadily eroding the basic safeguards of the 1934 Act benefit anyone but Wall Street? How does protecting the rich and powerful, at the direct expense of the investing public, fulfill the SEC's mandate?
I could devote books to this. But it wouldn't matter. What does matter is that finally it appears that the SEC is going to have to answer for its behavior, and is going to have its actions investigated by an outside entity. We can only hope that won't result in another cover-up.
I remain cautiously optimistic.
From a post on the PAVC board
Posted by: tiger1
In reply to: None Date:10/3/2006 2:32:48 PM
Post #of 13433
survivor thought you would be intrested
from another board
Jump to msg. #
pennylanega check this out
the corruption in the sec stopped and they cleansed without announcing it:
...an excellent post (IMO) via Abadgoodgirl:
What was the name of the pandemic that hit the SEC over such a short period of time? Almost all Senior Management was extinguished. Was it the Glenn-Maheu syndrome?
1/19/2005: Patrick Von Bargen, Managing Executive for Policy and Staff, to Leave Commission 2 years
2/18/2005: Paul F. Roye, Director of the Division of Investment Management, Announces Intention to Leave the SEC 8 years
3/9/2005: Spencer Barasch, Head of Enforcement for the SEC's Fort Worth Office, to Leave the Commission 10 years
4/14/2005: Enforcement Director Stephen M. Cutler to Leave Commission 7 years
6/1/2005: SEC Chairman William H. Donaldson to Step Down on June 30 2.5 years
6/30/2005: Matt Well, Director of Public Affairs, to Leave the Commission
6/30/2005: Peter Derby, Managing Exec. & Ops Management leaves after 10 years. He founded the the first private Russian bank and the first Russian investment firm
6/30/2005: Joseph Hall, Managing Executive for Policy, to Leave SEC 2 years (Hall also worked for Reuters)
7/6/2005: David Kornblau left Commission. He was Chief Litigation Counsel of the Division of Enforcement. [10 yrs]
7/21/2005: Martha Peterson, Counselor to former Donaldson to leave commission
8/8/2005: Sandra Harris, Asso. Regional Director and Co-head of Enforcement for the SEC's Pacific Regional office in Los Angeles. Harris was charged with oversight of prosecution for violations in nine western states. She had been there for 18 years.
8/15/2005: Harold F. Degenhardt. District Administrator, in the Fort Worth office leaves after 10 years.
9/7/2005: Donald Nicolaisen, Chief Accountant, US Securities to leave commission. 2 years
11/1/2005: David B. Smith, Jr., Associate Director, Division of Investment Management, to leave commission 9 years
11/4/2005: Andrew D. Bailey, Jr., Deputy Chief Accountant, US Securities and Exchange Commission, to leave SEC 1.5 years
11/30/2005: Giovanni Prezioso, SEC General Counsel, to Leave the Commission 3 years
12/6/2005: Meyer Eisenber, Deputy General Counsel and Acting Director of Division of Investment Management, to retire from SEC
12/21/2005: Lawrence A. West, Asso. Director of Enforcement leaves after 12 years
12/30/2005: Larry Bergmann, Sr. Asso. Director in Division of Market Regulation retires after 25 years
1/11/2006: Alan Beller, Corp Finance Division Director to leave commission (5yrs)
3/7/2006: Randall Fons, Head of the SEC’s Central Regional Office, to leave the Commission (9yrs)
3/14/2006: Jim McConnell, SEC Executive Director for 20 years leaves.
4/13/2006: Richard Wessel, District Administrator of the SEC's Atlanta District Office, to Retire Rich has made a significant contribution to the work of the Commission during his 32 years of service as the District Administrator of the Atlanta District Office, as an Associate Director of the Division of Market Regulation and as a member of the Division of Enforcement in Washington, D.C
5/15/2006: Glassman, a commissioner, leaves Commission
5/18/2006: Paul Berger, Associate Director of Enforcement, to Leave Commission
6/6/2006: Susan Ferris Wyderko, Director of the Office of Investor Education and Assistance, to Leave Commission
There you have it. Now, for the individuals who will say, okay, so people quit. Well let us present the same facts in another light. Let us recap the titles of those individuals who left the Commission between 1/19/2005 – 6/6/2006
Managing Executive for Policy and Staff 2 years
Director of the Division of Investment Management 8 years
Head of Enforcement for the SEC's Fort Worth Office 10 years
Enforcement Director Washington, DC 7 years
SEC Chairman 2.5 years
Director of Public Affairs
Managing Executive. & Operations Management over entire SEC 10 years
Managing Executive for Policy 2 years
Chief Litigation Counsel of the Division of Enforcement 10 years
Counselor to former Donaldson
Associate. Regional Director and Co-head of Enforcement for the SEC's Pacific Regional office 18 years
District Administrator, in the Fort Worth office 10 years
Chief Accountant 2 years
Associate Director, Division of Investment Management 9 years
Deputy Chief Accountant, US Securities and Exchange Commission 1.5 years
SEC General Counsel 3 years
Deputy General Counsel and Acting Director of Division of Investment Management
Associate Director of Enforcement 12 years
Associate Director in Division of Market Regulation 25 years
Corp Finance Division Director 5 years
Head of the SEC’s Central Regional Office 9 years
SEC Executive Director for 20 years leaves
District Administrator of the SEC's Atlanta District Office 32 years
Sec Commissioner
Associate Director of Enforcement
Director of the Office of Investor Education and Assistance
Recently, Microsoft had a few resignations and lost several of its key employees to Google. This news was all over the financial press and yet the SEC who is charged with oversight of the United States capital markets doesn’t even get a mention in the financial press.
Trust me, nobody willingly leaves the cushy government positions where they play solitaire and take long lunches to go work in the private sector because then they really have to actually work and kiss 9 to 5 play time goodbye.
Naked Short Sellers Hurt Companies With Stock They Don't Have
Bloomberg.com
By Bob Drummond
August 4, 2006
Movie Gallery Inc. shares fell 20 percent on Feb. 3, their biggest nosedive in almost a decade. At the time, there didn't seem to be a reason for the jaw-dropping rout.
Analysts who follow Dothan, Alabama-based Movie Gallery, the second-largest video rental chain in the U.S., speculated that investors were spooked after a large money manager cut its stake or that they were worried sales wouldn't meet expectations.
Another possible factor surfaced two weeks later, and it had nothing to do with financial performance. On Feb. 17, the Nasdaq Stock Market added Movie Gallery to a list of stocks considered, under a new U.S. Securities and Exchange Commission regulation, to be at risk for manipulation by naked short sellers.
In naked shorting, traders who hope to profit from falling prices sell shares without borrowing stock. Using that strategy, naked short sellers can drive down prices by flooding the market with orders to sell shares they don't have.
``These people are lying, they're cheating and they're stealing,'' says Wes Christian, a Houston lawyer who represents Internet discount retailer Overstock.com Inc. and more than a dozen other companies that say their stocks were pummeled by naked shorting. ``This is, in our opinion, the biggest commercial fraud in U.S. history.''
Movie Gallery Chief Financial Officer Thomas Johnson says he has asked the SEC to investigate whether naked short sellers helped undercut the stock.
`It's Extremely Frustrating'
``I'm throwing out the towel, saying `Help me,''' Johnson, 43, says. ``There are rules designed to deal with this, and people are still managing to do these naked short sales. It's extremely frustrating. It's like being on the front line and people are shooting you from every direction.''
In traditional short selling, traders rely on a strategy that's the mirror opposite of the time-honored adage to buy low and sell high. Short sellers borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.
Naked short sellers do the same thing, with one difference: They don't borrow any shares. Naked short selling isn't illegal in most cases, unless authorities can prove fraud, such as a scheme to manipulate stock prices.
The threat to investors arises because traders in naked short sales aren't limited by the number of shares available to borrow. If a naked short seller doesn't intend to borrow stock, he can pump a theoretically unlimited volume of sales into the market, driving down a company's shares.
`They Can Overwhelm'
Instead of hoping a stock will fall, like a traditional short seller, an unscrupulous naked short seller may be able to help make it happen.
``If they don't have to borrow shares, there's nothing that keeps someone from selling and selling and hammering the market with sell orders,'' says Leslie Boni, a former University of New Mexico finance professor who studied naked short selling as a visiting scholar at the SEC in 2003 and 2004.
``They can overwhelm the number of buyers, and as the buyers dry up, the price keeps dropping,'' she says.
When Movie Gallery's stock crashed on Feb. 3, short sellers sold almost 750,000 shares, or 11 percent of the shares traded that day, according to short-sale records compiled by Nasdaq.
Daily short sales averaged almost 370,000 shares over the first eight days of February, up from 70,000 on Jan. 31, while the stock plunged 36 percent to $3.47 from $5.45. As the stock was falling, a growing number of sellers weren't delivering shares to buyers, a warning sign under SEC rules of possible naked short selling.
`Warping the Market'
Nasdaq put Movie Gallery on its list of companies at risk of manipulation because from trades through Feb. 8, those undelivered shares topped 160,000, or 0.5 percent of Movie Gallery's total shares. When companies surpass that threshold, SEC rules impose restrictions on further short selling.
Patrick Byrne, chief executive officer of Salt Lake City- based Overstock.com, has been the most vocal executive charging that abusive short-selling schemes are draining the lifeblood from many companies.
``I've been pouring kerosene on myself and setting myself on fire because I think there are global, systematic issues with naked short selling,'' Byrne, 43, says. ``It's warping the market price of some small-cap companies and destroying American entrepreneurship.''
As of July 10, Overstock.com had been on Nasdaq's list of potential naked-short-selling targets every day since April 22, 2005, and its shares had fallen 45 percent over that period.
`It's a Nonissue'
Investors who specialize in selling short say naked shorting is rare and complaints from supposed victims are overblown. ``The phrase I would use would be red herring,'' says Jim Chanos, 48, who runs Kynikos Associates Ltd., a New York-based hedge fund firm known for short selling.
He says he's never used naked short selling as a technique. ``It sounds ominous, it sounds nefarious and, by and large, it's a nonissue in the marketplace,'' he says.
Wall Street traders have long thought that most complaints about naked short selling come from executives at poorly managed companies looking for a scapegoat when investors sour on their stocks, says Peter Chepucavage, a securities lawyer who has worked for the SEC and is now at Plexus Consulting Group LLC in Washington.
``The Street's view is that this never was a real problem, and that these guys are whiners,'' he says.
`Play by the Rules'
Phillip Marcum, CEO of Denver-based Metretek Technologies Inc., says he doesn't need excuses for his company's performance and generally doesn't give short sellers a second thought. ``We're a real company, with real investors and real revenue,'' says Marcum, 62, whose company sells commercial electricity- backup systems and meters to measure gas-well production.
Metretek shares quintupled in the 12 months through the end of March, when the company announced a $28 million sale of additional stock.
Still, the American Stock Exchange on April 10 put Metretek on its list of potential naked-shorting targets because of an increase in shares that weren't delivered to buyers. On March 30, Metretek's shares fell almost 7 percent as sales rocketed to 169,000 shares from a daily average of 11,000 a week earlier.
``You can't control somebody who shorts stock,'' Marcum says. ``But they've got to play by the rules. It seems to me, there ought to be severe penalties if you sell short without borrowing the stock. Can't they find out who's doing this and do something about these people?''
Enforcement Actions Coming
The short answer is no. The SEC puts most of its restrictions on brokerages, not naked short sellers. In one exception, SEC rules forbid naked short sales in connection with stock offerings. The SEC and exchanges have been investigating possible fraud in those instances.
``This is an area where we have seen problems, and you can expect enforcement actions,'' said Susan Merrill, the New York Stock Exchange's regulation enforcement chief, speaking to a securities industry conference in June.
In the past three years, the SEC has imposed a total of just under $24 million in penalties in five cases alleging that traders and investment firms illegally covered naked short sales using shares from stock offerings. Four cases were settled without admissions or denials of wrongdoing; the fifth is pending.
The reason company executives and short sellers debate the scope of naked short selling is partly because there aren't statistics that specifically measure such transactions.
750 Million Shares
New York-based Depository Trust & Clearing Corp., which processes the vast majority of U.S. trading, does keep track of how much stock has been sold and not delivered on schedule to the purchasers.
On an average day in March, those unsettled trades amounted to more than 750 million shares in almost 2,700 stocks, exchange- traded funds and other securities, according to Depository Trust & Clearing data obtained from the SEC through Freedom of Information Act requests.
Because there are innocuous reasons why stock may not get to the purchaser on time, such as paperwork delays, it's impossible to tell how many of those shares, known as failures to deliver, can be blamed on naked short sales, Depository Trust & Clearing spokesman Stuart Goldstein says. ``We're not in a position to know why trades fail,'' he says.
Failed deliveries of shares to buyers do provide the foundation for an SEC rule designed to blunt potential market manipulation. The measure is part of a broader package of short- selling rules known as Regulation SHO, for Short Sales.
Single Standard
The rule, called Reg SHO, was approved unanimously in 2004 after almost five years of consideration under three SEC chairmen. While Reg SHO doesn't outlaw naked short sales per se, it targets companies with enough failed deliveries to raise concerns about naked short selling, and it restricts further short sales of those stocks.
Reg SHO's short-selling restrictions took effect in January 2005.
The regulation's naked-shorting provisions were designed to create a single SEC standard to replace individual rules that previously were set by each exchange.
Supplanting exchange rules with one regulation meant the SEC, and not just market regulators, could police enforcement, says lawyer Chepucavage, 58, who helped draft Reg SHO. ``There was a belief that the markets weren't aggressive enough in enforcing the rules,'' he says. ``They tended to treat them as traffic ticket-type cases.''
Under the SEC rule, Nasdaq, the NYSE, the American Stock Exchange and smaller markets must get daily reports from Depository Trust & Clearing about failed deliveries.
The Restrictions
When an exchange finds that a company has accumulated unsettled trades equal to at least 10,000 shares and 0.5 percent of outstanding stock for five consecutive trading days, it's subject to stricter requirements for future short sales.
Exchanges keep the companies on these lists until failed deliveries fall back below the 0.5 percent level for five straight trading days.
Once a stock is on a list, Reg SHO requires any new short sales to be settled within 13 trading days. If shares haven't been delivered by that time, the brokerage involved in the sale must buy stock for delivery to the buyer.
If it doesn't, Reg SHO forbids the broker from handling additional short sales of that company's shares unless it makes binding arrangements to borrow the necessary stock. During June, more than 425 companies were on an exchange list.
Short Sales Increase
For the first year after the restrictions took effect in January 2005, the markets' lists suggest that Reg SHO cut down potential naked shorting. This year, the number of possible naked short sales has increased.
From February through May, the average lists reported more stocks than in any month since August 2005. The number of new companies that surpassed Reg SHO's thresholds for the first time also jumped in February, to an average of 18.5 from as few as 15 in October 2005.
Depository Trust & Clearing's statistics on total failed deliveries of shares to buyers show a similar trajectory: In February and March, more than 700 million shares that were sold were not delivered to buyers on an average day, the highest levels since December 2004, the month before Reg SHO took effect.
Shares of Inhibitex Inc., a biotech drug developer in Atlanta's northern suburb of Alpharetta, plummeted 9.8 percent on Feb. 27, their biggest one-day drop in more than 14 months and the worst showing among more than 160 stocks in the Nasdaq Biotech Index.
`Manipulating the Stock'
Nasdaq short sale records show that, during the two days ended on Feb. 27, short sellers traded almost 410,000 shares, up from fewer than 9,500 over the two preceding days. Enough traders failed to deliver stock over Reg SHO's limit for five straight days, so Nasdaq put Inhibitex on its list on March 8.
Company executives didn't return calls seeking comment.
Audible Inc., which sells audio newspapers and books on the Web, had delivery failures that broke Reg SHO's threshold from trading on Jan. 4. Over five days, short sales had averaged 309,000 shares, almost triple the level for the preceding week.
Audible, based in Wayne, New Jersey, ranked last in the 279- member Russell 2000 Technology Index during that stretch, falling 15.5 percent. ``When you're manipulating the stock, you're taking away from investors, the business itself and our employees,'' says David Joseph, 37, an Audible vice president.
These apparent short sale jumps were allowed by a snag in Reg SHO. Under the rule, delivery deadlines apply only to short sales made after a company appears on one of the markets' lists. Naked shorting before that point, including the trades that put a company over the rule's thresholds in the first place, can remain unsettled indefinitely.
SEC Reviews Rule
``It's a loophole which allows an unlimited number of fails against anybody,'' says Robert Shapiro, an economist and former U.S. undersecretary of commerce, who is a consultant for Christian and other lawyers representing alleged victims of naked shorting.
On July 12, the SEC voted unanimously to propose changes to short sale regulations that would remove that clause and set deadlines for settling trades before a stock is added to a threshold list. ``There are still persistent failures to deliver in the marketplace, and some of that is undoubtedly attributable to loopholes in our rule,'' SEC Chairman Christopher Cox said.
The hole in the rule helps explain why some companies have stayed on the threshold lists for months or longer.
As of July 17, New York-based Martha Stewart Living Omnimedia Inc., popular with short sellers since its eponymous founder's March 2004 trial and prison sentence for lying to federal investigators probing insider trading, had been on the NYSE's threshold list 383 times, or every day since Reg SHO took effect more than 18 months earlier.
Krispy Kreme
Taser International Inc. had a 379-day streak on Nasdaq's list that ended on July 11. The stun gun manufacturer based in Scottsdale, Arizona, had faced an SEC probe of its accounting and product safety claims, and its shares fell 78 percent in 2005. The SEC ended its inquiry in May without bringing any charges.
Krispy Kreme Doughnuts Inc., a one-time Wall Street favorite that fell from grace as the SEC investigated its accounting in 2004, was on the NYSE list for almost 18 months. Shares of the Winston-Salem, North Carolina-based company plunged 54 percent in 2005.
Taser and Krispy Kreme are typical examples of companies pounced on by short sellers after setbacks threaten stock prices. ``There's no doubt some companies have issues other than stock manipulation,'' Christian says.
``But they should be allowed to succeed or fail on their own and not because of manipulative market conditions,'' he says. ``This is not just attributable to whining companies that couldn't make it.''
14 Lawsuits Filed
The stakes in the debate were raised when an alliance of lawyers, including Christian, 53, and fellow Houston litigator John O'Quinn -- a billionaire from fees in a $206 billion tobacco industry settlement -- joined forces to represent companies alleging fraud in naked shorting.
The group has already filed 14 lawsuits against short sellers, brokers and Depository Trust & Clearing and plans at least 20, Christian says.
A short sale begins, like other trades, when investors tell their brokers they want to sell stock. Reg SHO says a broker must check to make sure a brokerage or institutional investor has stock it's willing to loan the short seller in time for settlement, which for most U.S. stock transactions takes place three business days after a trade.
`It's Demoralizing'
After confirming the availability of stock loans, brokers send a sell order to the appropriate exchange, where shares are sold to investors who want to buy the stock. There's no law requiring short sellers to actually borrow shares.
Last month, NYSE Regulation said it fined four securities firms a total of $1.25 million for Reg SHO-related violations, such as failing to properly confirm and document the availability of stock loans before handling short sales. The brokers, units of Daiwa Securities Group Inc., Goldman Sachs Group Inc., Citigroup Inc., and Credit Suisse Group, accepted the NYSE's fines without admitting or denying wrongdoing.
In a traditional short sale, buyers receive actual shares in a company. In a naked short sale, buyers effectively get an IOU promising that stock will be delivered at a later date.
When naked short sellers target a company, the results can be devastating, says David Vey, chairman of King of Prussia, Pennsylvania-based Sedona Corp., which sells software programs that help banks manage customer databases.
``It's demoralizing when you're working hard and someone else is staying awake at night trying to figure out how to take your money,'' Vey says.
`Prove Staying Power'
In 2003, the SEC filed a suit alleging that a single naked short seller, Rhino Advisors Inc., a New York-based investment firm, accounted for 40 percent of all Sedona transactions during 21 days in March 2001. The short sales came after the company sold debt securities that could be converted into shares.
The stock plunged from a high of $1.50 to as little as 72 cents in that period. Rhino settled the case in 2003 for $1 million without admitting or denying wrongdoing.
That kind of drubbing makes it difficult to attract new investors and capital and leaves potential customers wary, Vey says. ``You have to prove credibility and some kind of staying power,'' he says. ``People don't want to buy your product if they're worried you're not going to be here in two years.''
On July 10, Sedona shares closed at 21 cents in over-the- counter trading.
`A Bit Overdone'
Depository Trust & Clearing's Goldstein, 55, says failed deliveries represent only a tiny fraction of U.S. stock trading, and naked short selling is one of many explanations for settlement delays.
At the end of 2005, about 23,000 trades hadn't settled compared with about 26 million transactions on a typical day last year, Depository Trust & Clearing says. ``We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone,'' Goldstein says.
While there's more than one reason shares might not be delivered to buyers, Depository Trust & Clearing statistics for the days immediately after the SEC announced it would have new rules show that there could have been hundreds of millions of naked short sales.
In eight trading days after the SEC released details of the new rule on July 28, 2004, failures to deliver skyrocketed 70 percent to more than 1 billion shares. They kept rising and, within a month, topped 2 billion shares.
Before the Rule
The size and suddenness of that surge suggests it was caused by a rush of naked short sales rather than a rash of bookkeeping snags, Chepucavage says. ``One might speculate that people were getting their naked short sales in before the rule took effect,'' he says.
The rule's dependence on threshold lists was aimed at weeding out most of the clerical delays in stock sales that didn't produce shares at settlement, says Boni, 49, who's now a managing director at UNX Inc., a brokerage in Burbank, California.
Short sales and stock price movements for companies added to the SEC's lists, in some cases, recall an old saying: Just because you're paranoid doesn't mean that someone's not out to get you.
In April, Z-Trim Holdings Inc., which makes a calorie-free fat substitute for processed foods, hired lawyers Christian and O'Quinn to investigate whether naked short sellers sold shares of the company, which is based in the Chicago suburb of Mundelein.
`Huge Losses'
Reg SHO data show that Z-Trim, then known as Circle Group Holdings Inc., was placed on the American Stock Exchange's threshold list on March 3, 2005, reflecting failed deliveries from trading through Feb. 22.
Over five trading days, daily short sales climbed to almost 40,000 shares on Feb. 22, from 3,300 a week earlier, while Circle Group's stock fell 24 percent to 76 cents from $1.
``Stock manipulators can cause huge losses for real people who invested real money,'' Z-Trim CEO Gregory Halpern says. The company retained lawyers to try to protect its investors, he says.
``We aren't sitting here complaining that our stock was manipulated, woe is me,'' Halpern, 48, says. ``But having been thrust into that battle, we're going to fight like hell, because we have a responsibility to our shareholders.''
For Dallas-based business software maker I2 Technologies Inc., threshold-busting trades occurred on Sept. 30, 2005, when short sales more than doubled to 51,000 shares from 21,000 the previous day. I2's shares fell 10.1 percent to $18.64 from $20.73.
Worst Day
That was the stock's worst day in almost eight months and the third-biggest decline in the 575-member Nasdaq Computer Index. Company executives declined to comment.
Meanwhile, companies continue to see shares tumble under possible pressure from naked short sales. A month after Movie Gallery's stock collapsed in February, the company's investors had an even worse day, on March 8, after the company met with lenders about revising restrictions regarding loans.
Over two days, shares fell more than 34 percent, while short sales averaged 2.5 million shares -- up from an average of 300,000 during the previous week. Trading on March 8 created enough failed deliveries that Movie Gallery was again added to Nasdaq's threshold list.
Cromwell Coulson, CEO of New York-based Pink Sheets LLC, which runs a market for over-the-counter stocks, says making more information public about short sales is a key to fighting abuses, particularly for investors and executives in small companies.
For example, under a new NASD rule, Nasdaq's threshold lists in July started including failures to deliver for shares of some small, over-the-counter companies that weren't covered by Reg SHO. Nasdaq also began including OTC Bulletin Board and Pink Sheets companies in monthly short-interest reports in July.
`A Bogeyman'
``Naked short selling has been a bogeyman; it was like Bigfoot,'' Coulson, 40, says. ``Everybody thought it was out there, but nobody knew for sure.''
Sedona's Vey says regulators at the SEC and each stock market need to hit some abusive traders with multimillion-dollar fines. ``They need to make a few examples out of people,'' he says. Until penalties are big enough to take the profit out of stock manipulation, he says, all the rules and procedures in the world will make no difference.
Posted by: eatyourshortsms
In reply to: None Date:9/28/2006 5:00:02 PM
Post #of 12996
Junior mining exploration companies are almost always attacked by naked short sellers. This is due to the statistical chance of one of these finding an economic deposit, namely about 1-in-100. The naked short sellers are aware of the statistics and are only playing the odds. Their attacks also create the steep odds. Wildcat oil drillers are treated the same way. Any company with a large % of Canadian shareholders (most mining companies) have a large naked short position due to the laxity of Canadian laws.
I have a friend who has written books about Naked short selling and short selling. There are very few ways to really beat it. If you catch them off guard with massive volume buying started by a big announcement you may cause a short squeeze. Sometimes the company paying a dividend to shareholders can help but I have seen this tactic not work. One of the best ways is for the major holders to pay a small fee and have their electronic shares turned into actual paper certificates. This cost a small fee. Try doing this and see how much grief you get from your broker and how many excuses and delays they will come up with. There are many of you holding in the millions of shares. If you have a million or more doing this will cause those shorting this thing to crap their pants or in this case their shorts.
For more understanding continue and you will see what I mean;
• Stock lending is exclusively an activity used by short sellers, who must borrow stock before selling it.
• Short selling is a bet on stock price declines. The short seller borrows stock, and then sells that borrowed stock, hoping to buy it back at a lower price later, when he returns it to the lender.
• Illegal “naked short selling” involves placing a sales transaction, but not borrowing the stock, and simply failing to deliver it on delivery day. It is also called “failing to deliver” or FTD – or delivery failure.
• Delivery failure is a significant problem nowadays, as it can be used to run stock prices down in a manipulative manner. Delivery failure in any other industry is called fraud. Hedge funds are the biggest culprits in this illegal trading strategy, with broker/dealers right behind them in the culpability queue.
• Hedge funds are now the largest players in the US equities markets, representing the majority of trading, with almost $2 trillion under management.
• Hedge funds are large, virtually unregulated pools of anonymous money, used to invest in any way the operator sees fit.
• Prime brokers allow their hedge fund customers leverage on their assets, meaning that for every dollar of asset, they could easily hold $10 of short positions.
• This over-leverage presents a systemic risk should positions in several larger funds go the wrong way, as there isn’t enough collateral to cover the domino effect of multiple positions being forced to cover.
• This over-leverage creates an environment where the brokers are now pregnant with their hedge fund customers’ liabilities, and have a vested interest in seeing depressed stock prices remain depressed – if the stocks go up, the hedge funds could easily fail, and the brokers are on the hook to buy-in and deliver the stock owed by the funds – resulting in brokerage failures.
• The DTCC is ultimately at risk for this domino effect, as brokerages fail.
• The DTCC is owned by the brokers, thus is the brokers.
• The DTCC processes over $1.2 quadrillion (million trillion) every year, and owns most of the stock American investors hold in their accounts - but most of the country has never heard of the company. The total GNP of the planet is about $20 trillion per year.
• 1% of all trades in dollar volume fail to settle (be delivered) every day, per the SEC.
• $130 billion to $150 billion of equities trade every day.
• $2 trillion of total trades are processed by the DTCC every day, including bonds.
• The SEC does not qualify whether they refer to total trades, or total equities, when referring to 1% failing to settle.
• The SEC keeps the total dollar value of trades that have failed to be delivered secret.
• The SEC “grandfathered” all failed to deliver trades prior to January, 2005, effectively pardoning all those trades (for which money was paid but no stock ever delivered), from ever being required to deliver. This amounts to allowing those that violated delivery rules to keep the money from their illegal conduct.
• The SEC keeps the number of shares grandfathered, as well as the dollar amount, secret, for fear of creating market disrupting “volatility”.
• The above numbers do not take into account the large number of undelivered trades that are handled “Ex-Clearing” – a way of handling delivery outside the system.
• Many securities scholars believe the “Ex-Clearing” failure problem is 10 times larger than the in-system problem the above numbers represent.
• Many investors that think they have “shares” in their brokerage accounts, don’t. They have “markers” that have no underlying share to validate them. Some call these “counterfeit shares”, with good reason.
• The DTCC, via Cede & Co., is the registered owner of all shares held in "Street Name," which are all shares in margin accounts.
• Margin accounts represent the bulk of independent investor account types.
• Registered owners are free to use their “property” as collateral for loans or debt.
• It is unknown what, if any, loans or debts are collateralized by the stock “owned” by the DTCC.
• The DTCC’s “Stock Borrow Program” lends shares to be delivered to buyers, if sellers fail to deliver.
• The Stock Borrow Program is operated on the honor system, and is anonymous.
• It allows one genuine share to be lent multiple times, leaving a string of markers/IOUs in the share’s wake.
• This creates a systemic risk for the stock market, as more markers are in investor accounts, falsely represented as shares, than shares actually authorized by the companies.
• These markers are freely traded and treated by the system as real, resulting in a large secondary market of counterfeit shares – resulting in depressed stock prices.
• With paper certificates being eliminated – by the DTCC – there is no way to confirm that a share is genuine, versus a bogus marker.
• Only a handful of people on the planet understand all this.
• In the end, it is simple – Wall Street is printing shares electronically, investors are paying real money for those bogus shares, and the whole thing is predicated on the idea that few will ever understand what is being done, or bother to check.
Global links NSS article.
http://www.forbes.com/business/2006/08/18/naked-shorts-global-links-cx_lm_0818shorts.html
Posted by: sludgehound
In reply to: None Date:9/15/2006 3:17:50 PM
Post #of 813
Forbes: SEC doesn't force naked covering T+13
Financial Services
Naked Fines
Liz Moyer, 09.13.06, 5:00 PM ET Forbes.com
The U.S. Securities and Exchange Commission has received a deluge of requests to amend short-selling rules it enacted just two years ago as the New York Stock Exchange continues its efforts to enforce existing regulations.
JPMorgan Chase has become the fifth bank to be censured and fined by the NYSE's regulatory division for violations of trading rules meant to curb abusive short-selling.
The New York bank agreed to pay $400,000, without admitting or denying guilt. NYSE Regulation said Tuesday that JPMorgan violated numerous rules related to its handling of stock short-sales, a strategy in which the trader is supposed to borrow the shares, or at least find a broker who says he has them and is willing to lend them, before he makes the trade.
NYSE Reg says JPMorgan violated Regulation SHO, a rule put into effect in January 2005 by the SEC to curb abusive trading practices by limiting the ability of traders to do what's called a naked short-sale, which is selling a stock they haven't borrowed.
The exchange's enforcement arm says JPMorgan inaccurately marked sell orders, submitted inaccurate trading data and transacted short sales without reasonable grounds to believe the stocks could be borrowed. JPMorgan also had programming and systems errors that caused many of the problems.
A naked short-sale frequently results in those shares not being delivered to the buyer within the mandated three-day window. This is called a "failure to deliver," and despite assertions by some that the problem is not pervasive, it is enough of a problem to have attracted the increasing attention of the SEC and market regulators.
In July, Citigroup, Daiwa Securities, Goldman Sachs and Credit Suisse collectively paid $1.3 million for similar violations. They were the first firms to be slapped with a NYSE censure since the enactment of Reg SHO.
Daiwa paid the heftiest fine of those four, $400,000. NYSE Reg said one of the firm's proprietary trading desks transacted 103,000 short-sales without locating the shares to be borrowed. Also, the NYSE said, Daiwa's stock loan desk didn't document compliance with the stock locate requirements.
Critics complain that the enforcement efforts to date lack sharp enough teeth to discourage future abuses.
JPMorgan's fine looks miniscule compared to its $160 billion market capitalization. Through June, the bank had reported $1.7 billion in revenue from equity markets activities. A bank spokesman had no comment Tuesday.
"By levying a fine that is but a tiny fraction of the ill-gotten gains, the SEC is pinning a 'Kick Me' sign on the backside of the rule of law," says Patrick Byrne, CEO of Overstock.com, and big activist for reform in trading rules. "But the SEC is not monolithic: Though the brass are mostly captured regulators, in the rank and file, and at the highest echelons, I believe there are people who understand the gravity of the situation and who want to do something about it."
The SEC, recognizing continued problems with persistent and large trade failures in a few hundred stocks, is currently gathering comments about proposed amendments that would close some loopholes. The comment period is set to end early next week, and the agency has posted nearly 200 letters on its Web site urging reform.
Among the comment letters received so far is one from Utah Gov. Jon Huntsman Jr., who earlier this year signed into law stiff penalties for brokerage firms that didn't immediately report failed trades in the stocks of Utah companies to the state's division of securities.
The law was written for the benefit of Salt Lake City-based Overstock.com, a heavily shorted stock that has had persistently appeared on Nasdaq's lists of stocks that fail to deliver since Reg SHO was put in force. Gov. Jon Huntsman backed down during the summer after an intense lobbying effort by Wall Street firms, who complained that compliance would be too costly and cumbersome. Utah won't enforce the law until next June.
But in his comment letter, dated Sept. 8, the governor urged amendments to Reg SHO, including shorter trade settlement deadlines and daily disclosure of trade failures. "Restoring investor confidence requires both additional enforcement attention by the SEC and additional regulatory changes," the governor wrote.
The current rules don't require the brokers to fix the trades by buying shares to cover their short positions after 13 days, they merely say that if the trades aren't fixed, the broker can't do any more short-sales in that security without borrowing or arranging to borrow the stock.
The Depository Trust & Clearing Corp., the New York clearing house that is owned by the big brokerage houses and whose mission is to settle and clear the lion's share of the daily stock transactions that occur in the markets, says it has no power to force brokers to fix the trades either, a fact that also frustrates critics of the current system.
"We don’t have any power or legal authority to regulate or stop short-selling, naked or otherwise," the DTCC says on its Web site. "We also have no power to force member firms to close out or resolve fails to deliver."
Brad Niswonger, a senior vice president for brokerage firm Robert W. Baird Co., complained in a July letter to the SEC, "It seems like every day the SEC fines someone for fraudulent stock transactions, but they walk away after collecting their fee without completing the transaction by making these players buy in the illegal short positions."
A Canadian brokerage firm also complained to the SEC about its experience trying to settle its purchases of shares in Overstock.com. The broker, Research Capital of Toronto, says it tried to buy shares of Overstock to satisfy customer orders but has never received the actual shares it bought, even after 39 attempts to force the brokers who sold it the stock to produce the shares.
Research Capital says this has been going on since February 2006. "The failed deliver has simply been replaced with another delivery commitment which also fails," the brokerage says.
NYSE Regulation says it has been reviewing broker firm compliance with the Reg SHO rules as part of its annual examinations, and more rule breakers could be exposed.
"This is definitely an area of focus for us," said a spokesman for the regulatory arm of the Big Board.
OT.
any info on rxpc
thanks
You've sure got your work cut out for you, Jeff...
Was reading some of the lawsuits brought against the DTCC. It doesn't look like anyone, including this recent case, has won a single NSS case against them. You mean to tell me they're all wacko cry-babies like the DTCC portrays them?
I give them all credit for taking a stand against such odds. It's a shame they have to spend all their time and money on litigation instead of running the company. And the NSS wheels just keep on turning as the DTCC/SEC look the other way...
Federal Court Dismisses Lawsuit Against DTCC June 2, 2006:
http://www.dtcc.com/PressRoom/2006/whistler.html
Cases Filed Against The Depository Trust & Clearing Corporation (“DTCC”) and its Affiliates Related to the Issue of Naked Short Selling:
http://www.dtcc.com/ThoughtLeadership/keyissues/naked_short_case.htm
I've got alot to do here to organize everything but hopefully it will become an assett to all of us. Thanks for stopping by:)
Thank for the board, Jeff... long overdue imo...
Thanks very much Ced. Hope all is well with you and your portfolio a nice shade of green.
Here is the other...
http://banking.senate.gov/05_03hrg/030905/live.ram
Make sure and scroll the tab over to 1 hour 19 minutes and 40 seconds. It addressed NSS.
Here is one of the links JR
http://www.businessjive.com/nss/darkside.html
The problem we run into is these foriegn MM's that allow tons of BS to go on and the US can't do shite about it. NSS is allowed in other countries...I think.
Do you have more information about when they went after kingofpennies2k4 aka shakerz? TIA
Ask them about GVRP. OS=11 Float=1. Insiders sold the ONE share 138,000 times with a 3,000,000 to 1 FS due on 5/23/2005. They sold the previous week FS shares they had received early. SEC regulations state that those who bought the shares prior to the ex-date of 5/23 are entitled to the FS shares. The mistake caused the Auth of 100M (or 33 shares pre FS) to be obliterated.
Surely then one would expect those who sold in error to have to buy their shares back off the open market since they made a mistake.
Surely the SEC would not step in and suspend the NET CAPITAL rule which caused those with a short position to have to cover. Surely the SEC would not allow insiders to sell the company 12,500 times adn the float 138,000 times. Surely the SEC would not allow the MMs who shorted this stock to not have to cover their short positions.
That is EXACTLY what the SEC has done. The biggest mistake in any stock market anywhere in the world and those on the correct side of the mistake are getting screwed because the regulators are throwing the rule book out the window and letting those with a huge short position walk away scott-free.
OUTRAGEOUS. Then throw a little fine at about 15% of the shares that were traded and say see we protected investors.
GVRP is the finest example in the world of extreme shorting that was sanctioned and approved by the regulators. Their failure to enforce the security laws, and in fact to suspend them, created a corrupt and unfair market place.
Just the truth plain and bold.
Look, I didn't start this board to nit pick. The MMs and brokers are supposed to represent a FAIR market. I shouldn't have to learn MM signals, when it appears to be shorting, and all the various tactics they use to STEAL money from investors, which in all honesty, no one can learn. I pay my taxes and expect the SEC and NASD to do their jobs. You can choose to play by their rules but that doesn't mean I or anybody else has to.
CEO resume inflation gets $4.5M
[Others just get fired!]
What Degree?
R.H. Donnelley CEO has a degree of a problem.
Click the link below to read the full story:
http://www.forbes.com/2006/09/08/donnelley-swanson-college-cz_wpb_0908donnelley.html?partner=alerts
Careers
What Degree?
William P. Barrett, 09.08.06, 1:00 PM ET
David C. Swanson, chief executive of R.H. Donnelley, does not have the college degree attributed to him by company statements that were posted on its Web site, and by other references.
Tyler D. Gronbach, a spokesman for the Cary, N.C.-based yellow pages publisher, confirmed that Swanson dropped out of Minnesota's St. Cloud State University in the 1970s "a few credits" short of a degree for financial reasons and took a yellow pages sales job.
Two Donnelley press releases, including the Jan. 7, 2002, announcement of his impending promotion to chief executive, stated that Swanson holds a bachelor of science degree from St. Cloud. The claim was repeated in a 2004 trade publication profile and in a Web-posted bio for a directory trade group, the Yellow Pages Association, where Swanson serves as secretary-treasurer.
Following an inquiry by Forbes, Donnelley changed the language on the two press releases on its Web site to say that Swanson "attended St. Cloud University without earning a degree." A similar change was made on Swanson's bio on the trade association site.
Gronbach says Swanson wasn't responsible for the false claim, which the spokesman attributed in part to incorrect conclusions by contract publicists hired by Donnelley. He said Swanson's job application when he joined Donnelley as an account executive in 1985 does not cite a degree.
Gronbach said a draft of the 2002 press release mentioning the degree had been sent to Swanson before it was issued. "Mr. Swanson did see the release but didn't spot [the error]," the spokesman said. "That is regrettable."
He said that Swanson noticed the error immediately after that press release was issued--apparently, before he took control as chief executive--and informed the firm's general counsel, Robert J. Bush. According to Gronbach, it was decided that "no further communication was warranted," even to Donnelley's board. Gronbach said the board was told about the missing degree this week only after the company received an anonymous letter.
The letter, described as containing other unflattering comments about the style and business strategies of Swanson, was signed "a very concerned employee." The directory industry is undergoing consolidation, and Donnelley has had to reduce staff.
Shares of Donnelley, which in 1998 was spun off from Dun & Bradstreet, have risen 85% since Swanson took the top spot in May 2002. Swanson's compensation last year, including the value of exercised options, was $4.5 million.
If the police tell you to lock your doors but you don't, whose fault is it when you get robbed?
Whining? Nice post, very helpful, lol. If your house gets broken into, don't whine to the police, just try to understand how the criminals work and use it to your advantage. No difference in my book.
Maybe instead of whining to your Senators you should spend some time learning how and why the markets work the way they do.
Here's a good start..
http://www.investorhome.com/daytrade/spread.htm
Stock markets are not non-profit organizations staffed by social workers paid by the government to provide a public service. Brokers, specialists, and market makers don’t participate in the markets for their health. They trade only when they expect to make profits. Those profits are the price that investors and other traders pay in order to execute their orders when they want to trade.
Scottrade uses Nite as their MM and I beleive the following list are stocks that Nite is shorting so they won't let Scottrade customers buy these securities. I hope this helps!
Scottrade has set restrictions on the following securities due to clearing restrictions:
No Buys/Sells Only
CESV
CWIR
CSJJ
VWKM
GSFT
.MKZUN
CMKX
INOV#
TRZA#
MSMC#
IVCO
SEIH
UGMI
HPNN
GMZC#
.AFPUN
GRDL
USCI
.FCEUN
.TPWUN
.TPLUN
AWHB
CESY
INCA
.AIUN
RVNM
AFRD
.IPLUN
.TAYUN
ORSTF
BBVAY
IPPLF
.PGFB
.PUB
.CVLUN
.TRF X
PHLC
RVEM
CWPUF
No Buys/Sells Only - You cannot place buy orders on this security. Only sell orders can be placed.
**Symbols with the "#" after the symbol cannot be traded online. Please contact your local branch for assistance.
Symbols appearing in green text are recent additions or changes to the list.
Best and most HONEST IR FIRM I found so far was from MGGV.pk
Kelly is a star ...an angel
For the last couple of days I tried selling some stock I own in a pinksheet company. The MM would not reflect my ask which was lower than the one shown. I called Ameritrade and they said they would ask the MM to reflect it. The MM refused because it was for 50k and they only reflect trades of 5k. I asked Ameritrade to change to another MM and they said they couldn't. I asked if they were representing me or not and they said it is just the way the pinks work. I asked them how can I sell a stock if the price is not advertised? I also asked why I should have to list my stock in 5k increments and pay 10 transaction fees? They said it wasn't fair but that there was nothing more that they can do.
This represents another example of how MMs steal money from us. They can force you to sell at the bid or wait until there is enough volume that they need your shares. This particular stock has a wide spread so they will continue to buy low and sell high and by-pass my order til I get frustrated enough to hit the bid.
I'm not sure what the answer is but MMs need to go. We are in the electronic age so we should be able to by-pass these middle men that rob and pillage the markets by going to an auction type set-up where it is just true buyers and sellers that actually have the shares in their accounts.
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