Megas World

[mastaflash]

Transgression #1: SEA34 Section 6(b)(5) Statute limits the authority of the SEC and the SROs by prohibiting them from regulating and selectively enforcing rules and statutes, in a way that is discriminatory against equity investors and issuers in favour of others.

FINRA issues notice: http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p015019.pdf

Additionally, NASD has confirmed the position of the SEC staff relative to the application of SEC Rule 15c3-3(m) Completion of Sell Orders on Behalf of Customers and SEC Rule 15c3-3(d)(2) Requirement to Reduce Securities to Possession or Control.
SEC Rule 15c3-3 requires member organizations to take prompt steps to buy-in securities to obtain physical possession or control under paragraph (d) (2) and to complete customer sell orders under paragraph (m). Such buy-in requirements related to BCIT are temporarily suspended until further notice.

Also, NYSE issues Memorandum 05-67 stating that buy-in
requirements pursuant to NYSE Rules 282 Mandatory Buy-In and 284 Procedures for Defaulted contracts, if applicable, are also suspended until further notice.

FINRA and NYSE allow fails to occur through selective non enforcement of existing statutes and rules. What is worse, they did it unilaterally ( there is no SEC notice as to "position of the SEC staff" ). Simply, the SROs cannot suspend any part of the SEA to suit their purposes.

Even more insidious, there is no provision in the act that allows SEC ( or any SRO that takes their lead ) to suspend a statute that was instituted by Act of Congress to protect investors. Only a court of law can attempt to do that.

Interesting note: This is the only case where buy-in rules have been suspended.