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Cancel my previous post. The board stays up. Free members can read all the info. and open the links...they just can't post. That's good enough for me.
I'll probably end up gutting this board...because, it is no longer...and will not be allowed to be a free-zone board (Because it is not a stock picking board). Anyone who isn't already a member of this board's other premium board copy (the link is below in my signature) should go there and bookmark it.
'Cause I'll probably stop working on this one very soon. Is has no point nor purpose if, it cannot exist in the free-zone.
You & rrufff are doing a fantastic job of tracking down the meatiest info around, I commend you both.
I found this on BB's board today:
Posted by: dustybutler1
In reply to: None Date:12/14/2005 4:36:27 PM
Post #of 474049
CMKX-(PRWEB) December 14, 2005 -- The biggest concern that investors have today isn’t whether the stock they bought was overpriced or undervalued, but whether or not the stocks they have purchased on the open market actually exist. It’s hard to believe, but it’s true. There are millions of “counterfeit” shares floating around the market as we speak, in hundreds, possibly thousands of publicly traded companies. You’re probably thinking to yourself, “that’s impossible” or “the government would never allow that”, but they have. In fact very little has been done to get rid of these counterfeit shares, and the vast majority have been “legitimized” by the Securities and Exchange Commission.
So how does this happen? How did the counterfeit shares get here in the first place? It all has to do with the process in which stocks are purchased, and delivered. When you purchase shares of stock in the open market, they show up in your brokerage account immediately after the transaction as a marker or “place holder”. The actual shares of stock aren’t delivered to your broker’s accounts until three days afterwards. So in other words the entity selling you the stock that you purchased has three days to deliver that stock and make good on their end of the deal. When the stock doesn’t get delivered it results in a “failure to deliver” transaction.
Now you might be wondering “how did the seller of my shares sell them to me?” The answer to that question, is they were shorted to you. In a normal “short” transaction the seller borrows shares from a lender and sells them to you, and the seller promises the lender that he will buy them back at a later date, hopefully for a cheaper price, and return them. When a failure to deliver occurs, the short seller never borrowed the stock from the lender, and thus was unable to deliver the stock to your broker’s accounts. The common name for this type of transaction is a “Naked Short” sale.
What this has created is a backlog of millions of failure to deliver “IOU’s” floating around in people’s brokerage accounts. In order to cleanse the market of these counterfeit shares the SEC adopted “Regulation SHO” which creates a threshold list of failure to deliver securities. Currently there are over 280 publicly traded companies on this list, some of which have been listed with continuous fails for over 235 days. At the top of the list are Martha Stewart Living Omnimedia, Krispy Kreme Doughnuts, and Netflix. The CEO of Overstock.com, also on the threshold list has made fighting Naked Shorting a personal battle.
The lesser told story of Naked Shorting deals with the smaller start up companies, which makes up the majority of the threshold list. With these companies Naked Shorters flood the market with counterfeit shares, creating an imbalance of supply and demand which drives the stock’s price to sub-penny levels. In these cases the aim of the Naked Shorters is to drive the company out of business and into bankruptcy, due to lack of available financing. Thousands of small companies have fallen victim to this practice, and very few have the resources to fight back. However there is one small mining company, CMKM Diamonds Inc. which is trying to fight back against Naked Shorting, by proving to the world that a Naked Short position in their stock exists. The task of doing such is left to the shareholders of the company, which are being asked to fax in copies of their physical stock certificates to the “CMKM Task Force”, which is headed by one time CIA Agent, and billionaire Howard Hughes right hand man, Mr. Robert Maheu. What the taskforce will prove, and what they are seeking to gain from this massive endeavor remains to be seen.
For more information about Naked Shorting you can visit the home pages of the Depository Trust and Clearing Corporation, or the National Coalition Against Naked Short Selling for two vastly different objectives.
Another good post found by: rrufff. It's been out for a few months...but, it's good.
POSITION PAPER
http://www.advancedsmallbusiness.org/positionpaper.htm
August 12, 2005
SHORT SELLING COMBINED WITH FRAUDULENT STOCK MANIPULATION
Submitted by Gregory J. Halpern – CEO, Circle Group Holdings, Inc. (CXN: AMEX)
Mr. Halpern is the Director of the Midwest Regional Chapter for the CEO Council
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.
Posted by: rrufff
In reply to: None Date:12/12/2005 12:44:17 AM
Post #of 513
_____________________________________________________
It's Money That Matters
by Mark Faulk Dec 11, 2005
Let's get straight to the point here: hedge funds are destroying America. By operating in complete secrecy, they have been able to "reward" their largely ultra-rich clientele by manipulating the stock market for decades through the use of naked short selling and stock counterfeiting, at the expense of the average investor. While millions of Americans have watched helplessly as they have been robbed blind for years and years, the rich continue to get richer.
Hedge funds are destroying America, and they're being aided and abetted by Wall Street, the major brokerage firms, the SEC, and Congress. And now that the SEC is finally trying to introduce even tepid regulations to this largely unregulated industry, they are looking for allies in the federal courts as well. In a lawsuit filed by Phillip Goldstein, a hedge fund adviser from Pleasantville, N.Y., Opportunity Partners, a hedge fund partnership; and its general partner, Kimball & Winthrop, federal appeals judges have already begun to side with the hedge fund industry in their battle to continue to operate in complete secrecy.
Let's begin by taking a look at the judges in the case:
Judge Randolph, appointed by President George H.W. Bush in 1990, is the same judge who ruled in July of this year that the EPA doesn't have any obligation to regulate carbon dioxide as an air pollutant under the Clean Air Act, siding instead with auto manufacturers. In fact, he has consistently ruled in favor of big business and big government over the rights of the average American. In 2001, he ruled in favor of Microsoft in their anti-trust case, and more recently, he ruled in favor of Dick Cheney in a case involving disclosure of secret documents concerning energy policy.
When it comes to protecting Americans against big business and big money interests, Judge Harry T. Edwards, appointed by President Jimmy Carter, hasn't done much better. He sided with AT&T in their 1984 anti-trust case, with Microsoft in the appeal of their anti-trust case in 2001, and has consistently ruled against stronger government regulations when it comes to big business.
And George W. Bush appointee Thomas B. Griffith? He had never even been a judge on any level when he was appointed by Bush to the U.S. Court of Appeals in 2004. However, he did let his Washington DC law license expire in 1998, and then practiced law in the state of Utah for four years without even bothering to obtain a law license at all. Oops!
So those are the judges in whose hands the future of our country lies. Feel better now?
The hedge funds are maintaining that the SEC has no authority to regulate the hedge fund industry, and, as an article in the New York Times put it last Friday, "that only Congress, where the hedge fund business has more allies than the commission, may make the changes that the agency is planning to impose."
Allies in Congress? What happened to the posturing and gesturing of a few months ago by members of the Senate Banking Committee, who promised to take on the issue of stock market reform by addressing the massive scandal involving stock counterfeiting through naked short selling? Since Banking Committee Chairman Senator Richard Shelby (R-AL) killed a planned Banking Subcommittee hearing in September, there has been absolutely no action by Congress to protect the American investor.
Even if the SEC manages to enact their new regulations in February of 2006, all they will have succeeded in doing is closing one loophole, while opening several more. The new restrictions will require that any hedge fund with more than 14 American clients will have to register with the SEC and be subject to the same disclosure requirements that all other mutual funds have had to follow for the past 65 years.
Foreign hedge funds are already taking advantage of the loophole that exempts hedge funds with less than 15 American investors. In an article in the UK Times, it was disclosed that many foreign hedge funds are already considering "asking their American investors to leave" rather than have to disclose their trading practices.
American hedge funds are exploiting another loophole in the new regulations that exempts funds that prevent customers from redeeming their capital for two years or more. Many are considering simply extending their "lock-up period" period to avoid the new laws. It's a win/win situation - they can continue to operate outside of the law, and hold on to their clients money for longer at the same time.
Yet another loophole exempts hedge funds with under $25 million in assets, and since hedge fund owners can open as many separate funds as they want, they can cap each one at just under the magic $25 million mark. In fact, one hedge fund manager who was convicted of fraudulently manipulating the stock market had 2,500 separate offshore accounts, and another has over 600 separate offshore hedge funds.
And then there's the most glaring omission of all. As long as all foreign hedge funds are not regulated by the SEC, in other words, as long as they are not required to adhere to the same rules that American investors must follow, they will continue to be able to use our own fraudulent trading system against us. Money will continue to flow out of America and into Lord knows whose hands.
The deadline to apply for registration is Thursday, December 15th. It will be interesting to see how many hedge funds register, and how many more have manipulated their way out of following the rules yet again.
Recent moves by the states, led by by the North American Securities Administrators Association, to begin their own investigations into naked short selling are a major step in the right direction, and could force Congress to finally address the problem, if only to avoid embarrassment. The states have already begun to assert themselves by holding a forum to discuss the issue on November 30th, where they addressed the issue of stock market fraud and naked short selling.
Instead of giving a blow-by-blow analysis of that forum, I'll reprint the commentary that I wrote after I sat and listened to the eight member panel discuss the fraud in the stock market that has been allowed to flourish unhindered for decades.
This was written on the evening of November 30th, in a hotel room in Washington DC:
Good evening from our corrupt capitol freedom lovers. I have mixed feelings about the NASAA forum on naked short selling today. It actually went better than I thought it would, but then I went in with pretty low expectations. Both sides were presented, and the "advocates for reform" on the panel presented their case well. And who were the advocates for reform? The financial experts, all of whom had facts, research, and reality on their side.
As for the SEC, they continued their tactics of deny, deny, deny, and make excuses, and when those don't work, make excuses for those excuses. It was politics as usual. While America burns, they continue to sing the same tired song.
And Congress? They, as usual, were nowhere to be found.
Did Ralph Lambiase, Connecticut Securities Director, nail the SEC as strongly as I would have liked him to? No, but I understand that he needed to stay somewhat impartial as a moderator. Lambiase did do a good job of bringing to the table the controversial issues of voters' rights for stockholders who have never received their shares, and the grandfathering in of all prior trade settlement failures by the SEC. However, the role of hedge funds in naked short selling was barely touched upon.
I applaud the actions of the NASAA, now we'll see if they follow up on it with real reform. The best thing that could happen would be the states forcing the SEC and Congress to deal with it on their own. Up to now, Congress has done absolutely nothing to address this financial tragedy, and we have to force them to accept responsibility for their gross negligence. On a side note, I know for a fact that word of this is filtering back to Congress, and hopefully, our advocates who are lobbying them will win some support from those on the hill (that's what we locals here in DC call it...."The Hill").
I did get to speak with several of the panelists after the forum, and was encouraged by their responses. On the other hand, when I introduced myself to the SEC’s James Brigagliano, he said simply, “Oh…..”, and turned around and walked off without saying another word. (Personal note to James: “I love you too.”)
Here’s something funny about J.B. His job description in today’s bios said that he “administers rules designed to prevent manipulative trading.” The facts presented in today’s forum alone should have been enough to get him fired as soon as he returns to his office. (Editor's note: no such luck, James is still with us two weeks later.)
In my opinion, the most encouraging comment of the day came after the forum, when I spoke with NASAA General Counsel Rex Staples, and asked him about the SEC and DTC’s efforts to convince states to eliminate paper certificates altogether, which would effectively destroy investors’ only recourse to prove actual ownership of the stock shares that they have bought and paid for.
His response? “It’s not going to happen. The SEC and DTC can lobby all they want to, but not one state has eliminated paper stock certificates, and no one will.
Keep fighting the good fight. In the end, right always prevails.
Doesn't it? Someone told me that somewhere, I hope it's true.
The issue of stock market manipulation and stock counterfeiting through naked short selling is one that affects every American, whether they own stocks or not. By destroying thousands of small businesses and allowing the ultra-rich to defraud investors and then move that money to dozens of offshore tax havens such as Bermuda, the Cayman Islands, and Belize - and out of our economy, the very foundation of our free enterprise system is in jeopardy. The hedge funds have "allies in Congress," while we have none. It will be interesting to see who will be the first in Congress to stand up for America in our battle against Big Money. As I said, there has been plenty of posturing and gesturing, but no real action whatsoever.
So much for "government by the people, for the people."
http://www.faulkingtruth.com/Articles/Investing101/1045.html
Cool Board! good luck stopping these F#$%s..
Looks like the title of this board was changed...but, it was not done by me.
I guess there's no such thing as "free speech".
Ie., more info. to be processed and remembered IMO.
Quote for today........
"If you want to succeed in the world you must make your own opportunities as you go on. The man who waits for some seventh wave to toss him on dry land will find that the seventh wave is a long time a-coming. You can commit no greater folly than to sit by the road side until someone comes along and invites you to ride with him to wealth or influence." - John B. Gough 1817-1886, British-born American Temperance Orator
"yep" yes I can, sorry..........
too busy thinking!!!
,,,,,$$$$$
Since I'm an accounting major, I printed
this out and read its entirety, just FWIW......
.........................................................
http://www.sec.gov/news/speech/spch120505psa.htm
yep I got er bookmarked,
http://safehaven.com/article-4259.htm
Thanks for the vote of confidence. I'm still learning and trying to improve. With some good friends, their help, eyes, experience and knowledge...we all will do better/should do better. One person can't see nor know it all.
In fact, it is largely because of the friends I've made at iHub that I continue to be a paying member. I'm gonna pay up again today.
One thing I needs to know is: If, one is a free member...can you read all of the links in this board's header? In particular, the links to posts from the premium board version of this board. If, the free members can't read these...I will likely have to copy some of them to this board...in the from of new posts.
I vote Bartermania for Teacher of Trading/Investing 101!
L~
(gee, maybe I shouldn't say that....you'll never have any time for trading, yourself!)
A GREAT POST!...(I've added some highlights and fixed-up some of the formatting...to the copy of this letter, which is located in the lower part of this board's header.)
To: Jonathan G. Katz, Secretary, Securities and Exchange Commission Subject: NASD-2005-112 Re: Release No. 34-52679
Dear Sir,
I thank you for this opportunity to comment on the proposed changes to NASD Rule 3360 in order to expand the short interest reporting requirements to all OTC securities. In a nutshell, I highly recommend this proposal and its implementation as soon as possible. I have been fortunate enough to devote the last 24 and one half years of my life to a very thorough study of the phenomenon known as naked short selling. During that timeframe I have written 2 unpublished textbooks on the subject, the most recent being an approximately 800-page analysis of naked short selling and the role of unethical DTCC
participating market makers and clearing firms and their interrelationships with primarily unregulated hedge funds.
As you at the SEC have no doubt realized by now, the wording used in Reg SHO has left a glaring loophole that any DTCC participants wishing to circumvent the spirit of this new Federal Law can easily access. Although the “Forced” federally-mandated buy-ins for certain threshold securities are clearly outlined, somebody at the SEC unfortunately inserted the verbiage, “If the participant does not take action to close out the open fail to deliver position (AS MANDATED BY THIS NEW FEDERAL LAW), the participant is prohibited from making further short sales in that security without first borrowing or
arranging to borrow the security”. Unfortunately, no clarification of what constitutes a legitimate reason for being unable to execute a mandated buy-in was included except that
the reason cannot be of a financial nature. In other words, if you refuse to obey this new Federal Law mandating “Forced” buy-ins which is now part of the 1934 Securities Exchange Act, your punishment is nonexistent but you’re reminded to obey the law in the future. I don’t know if this was inadvertent or just more “Deterrence-SEC style”. In a recent “self-interview” published by the DTCC, the DTCC made it crystal clear that
they intend to utilize this loophole graciously provided by the SEC. In this interview, the interviewer asks the Deputy General Counsel of the DTCC the following: @ DTCC (the interviewer): “So Reg SHO doesn’t force them to close out the position, even market makers are not exempt from this requirement, but if they don’t, they are prohibited from
making any additional short sales without borrowing the shares first”? Thompson (the DTCC Deputy General Counsel): “That’s right.” What’s interesting is that in the answer to the previous question this same Deputy General Counsel states: “The “Close-out” requirement FORCES (emphasis added) a
participant of a registered clearing agency to close out any “fail to deliver” position in a threshold security that has remained for 13 consecutive days by purchasing securities of
like kind and quality”. This verbiage is consistent with the exact phrasing of the law. My question to you at the SEC is, “Which is it”? Are these DTCC participants “FORCED” to do these “Mandated” buy-ins as outlined in the text of the law or not? My second question would be can the DTCC’s actions be interpreted as recommending to its participants the breaking of the new Federal Law (Reg SHO) because the punishment, irresponsibly advertised by somebody at the SEC as being nonexistent, really is nonexistent? People can and do break Federal Laws all the time. My third question is why advertise the loopholes accessible for breaking these new Federal Laws with no recourse within the text of these new Federal Laws unless, of course, somebody at the SEC’s heart wasn’t quite in the right place all along but wanted the SEC to be PERCEIVED anyways as acting as a shareholder advocate that is following its mission statement of providing “Investor protection and market integrity”? I think that you at the SEC can now get a pretty good idea of why the shareholder advocacy groups are critiquing the effectiveness of the new Reg SHO “Threshold Lists”. One fact that “pre-doomed” the bulk of Reg SHO’s honorable intentions is the rule on the books of the DTC and the NSCC that states that mandated buy-ins need not be executed
if their effect might be “Disruptive” to the markets. In layman’s terms this means that mandated buy-ins in the shares of an issuer that fell victim to a “Bear raid” that resulted
in its share price falling from $5 to 2-cents need not be done because these buy-ins might result in a “Market Disruption” involving the share price skyrocketing to 4-cents, an
enormous 100% gain. As you at the SEC are painfully aware, Section 19 C of the ’34 Exchange Act disallows the SEC from amending the rules and regulations of any “Registered Clearing Agency” like the DTCC. A quick review of some facts regarding
naked short selling might help you to coordinate your battle plan against naked short selling IF THIS IS TRULY A HIGH PRIORITY OF THE SEC. SOME FACTS RELATED TO THE NAKED SHORT SELLING OF U.S MICRO CAP SECURITIES
1) There are currently approximately 8,200 hedge funds managing approximately $1.05 trillion. About half of these fly under the regulatory radar due to some loopholes in the 1940 Investment Company Act.
2) In the post-decimalization era, market maker “Spreads” are now razor thin and many securities scholars contend that ethical market making firms cannot make an honest living in this environment. The downside of that notion is the resultant
“Survival of the corruptest” form of natural selection we are now witnessing in regards to the naked short selling pandemic.
3) Unethical market makers will bend or break any rule to attract the business of these hedge funds. They have to in order to survive. The money from primarily unregulated hedge funds drives this entire naked short selling “Industry within an
industry”.
4) In-house proprietary trading activity has skyrocketed recently among market making firms.
5) Our OTC markets are trying to “Evolve” and eliminate human intermediaries (market makers) subject to human greed and in possession of a vastly superior “KAV” factor (Knowledge of, Access to and Visibility of the clearing and settlement system run by the DTCC) and replace them with unbiased computers
(ECNs) to match up buyers and sellers. The current Wall Street power and influence structure will not allow this evolution to occur.
6) Unethical hedge funds will feed their massive order and commission flow generating abilities to any market making and clearing firm that prove to be the most “Accommodative” to these behemoths and their desires. They expect rules to be bent and broken on their behalf. Access to illegally working out of a MM’s “in-house proprietary account” is especially deserving of certain “Concessions” as we have seen in several recent cases involving certain hedge funds and certain market makers.
7) Hedge fund managers are under a lot of pressure to perform or their wealthy clients will move their money elsewhere. These clients expect their hedge fund managers to seek out “Accommodative” market making and clearing firms even if
there is criminal risk incurred by the hedge fund manager.
8) Bona fide market makers are legally allowed to naked short sell securities but only while acting in the capacity of a “Bona fide” market maker.
9) A bona fide market maker is expected to naked short sell nonexistent “shares” at the $5 level when an imbalance of buy orders over sell orders is present at that level and he has no inventory at the time.
10) Should the share price drop to perhaps $4.80 then a bona fide market maker uses the proceeds from the sale of the nonexistent shares he legally naked short sold at $5 to buy back these shares and pocket this 20-cent “Spread”. A bona fide MM is happy making “The spread”.
11) A bona fide market maker injects liquidity by buying shares when sell orders outnumber buy orders with the same zeal that he shows while selling shares when buy orders outnumber sell orders. The problem is that buying shares consumes money while selling shares, even if you don’t own nor intend to ever
purchase shares, makes money because of how the DTCC is “Wired”.
12) A bona fide market maker does not direct or restrict share price movement; he buffers the intensity of the swings in share price. The two main roles for short selling in general are to inject liquidity and to create “Pricing efficiency”. To create “Pricing efficiency” all negative votes (short sales) as well as positive votes (buy orders) need to be tallied as long as the short sales were preceded by a legitimate “borrow” i.e. not a “Borrow” from a “Self-replenishing” source like the
DTCC’s “Automated Stock Borrow Program” or “SBP”. Legal short selling is a very good thing that is crucial to the markets. Abusive naked short selling is a form of market manipulation which is a 10b-5 securities fraud usually involving criminal enterprises.
13) A bona fide MM, when faced with a large amount of buy-side activity, will allow the share price to find an equilibrium level above the current price after selling a MODERATE amount of shares at the lower price.
14) A bona fide MM would rather sell nonexistent shares at a higher level than at a lower level UNLESS HIS CURRENT NAKED SHORT POSITION HAS GOTTEN OUT OF HAND TO THE POINT THAT COLLATERALIZING AN ASTRONOMICALLY HIGH NAKED SHORT POSITION AT HIGHER LEVELS MIGHT BE COST PROHIBITIVE. SHOULD THIS SITUATION
PRESENT ITSELF THEN FRAUDULENT NAKED SHORT SELLING IS OFTEN SEEN AS THE ONLY ESCAPE ROUTE AND A “BLANKET” OF FRAUDULENT NAKED SHORT SELLING IS OFTEN PROVIDED BY THE TROUBLED MM AND ANY WILLING CO-CONSPIRATORS THAT HE CAN “RECRUIT”.
15) Bona fide market makers don’t get caught in this trap as they are more than willing to increase the price level of their offers if the buy-side pressure remains. This is referred to as “Averaging up”. Not so bona fide market makers don’t have this luxury if they were guilty of greedily selling nonexistent shares in a non-stop fashion just to get their hands on the buyer’s money before a competing MM was able to.
16) The ability TO APPEAR to be legally naked short selling securities while acting in a bona fide market making capacity is something the unethical hedge funds desire very badly but cannot legally attain.
17) There are many unethical market makers that have been so decimated by decimalization that they allow unethical hedge funds space under their “Umbrella of immunity” from borrowing before short selling which is supposed to be only accorded to bona fide MMs acting in a bona fide market making capacity at the time. The rental fees for this “Space” is paid in fees and commissions via order flow.
18) There are very few regulatory policemen monitoring market making activity in regards to whether naked short selling is truly “bona fide” or not.
19) When presented with trading evidence in a court of law, it would be extremely difficult for an unethical MM to claim that he was indeed acting in a bona fide market making capacity while constantly naked short selling into buy orders that dwarfed sell orders as a stock’s share price plummets from $5 to 2-cents. When buy orders overwhelm sell orders for prolonged periods of time share prices go up not down. Naked short selling by theoretically bona fide MMs is only legal when buy orders overwhelm sell orders.
20) The supporting bids of unethical MMs taking part in “Predatory trading strategies” are conspicuously absent as share prices fall despite their having the money from investors buying at higher levels in their coffers. THE SEC, NASD, AND DTCC CAN EASILY DETECT THESE PREDATORY TRADING STRATEGIES BY UNETHICAL MMs WHILE STUDYING TRADING DATA. THE EVIDENCE JUMPS OFF THE PAGE AT YOU.
21) The “Continuous Net Settlement” system (CNS) in use at the DTCC “Nets out” on a daily basis buy and sell orders which is extremely efficient BUT has a “Masking” effect on delivery failures which is an unwanted side-effect UNLESS YOU WANT TO HIDE THE EXISTENCE OF A PLETHORA OF UNDADDRESSED DELIVERY FAILURES. THEN IT’S JUST WHAT THE DR. ORDERED. DR. LESLIE BONI RECENTLY PUBLISHED AN EXCELLENT RESEARCH PAPER OUTLINING THE “PERVASIVENESS” OF DELIVERY FAILURES RESULTING FROM NOT SO BONA FIDE MARKET MAKING ACTIVITY.
22) At the DTCC, it is extremely easy for fraudsters to illegally sell nonexistent shares and actually get their hands on the proceeds without ever covering. PARDON US IF WE INVESTORS FIND THIS CONCEPT TO BE NOT ONLY HEINOUS BUT UNCONSCIONABLE. All these fraudsters need to do is to collateralize the naked short position in a “Marked to market” manner on a daily basis such that the depressant effect on the share price from yet further naked short selling allows the proceeds from previous naked short sales to fall into the lap of the perpetrators of these frauds. The key is to never stop naked short selling which might have the untoward effect of allowing the share price to increase to find its own unmanipulated equilibrium level. The current clearance and settlement system in use at the DTCC allows naked short ositions to be run up so rapidly that if the victimized issuer fails to die on cue then the perpetrators of this fraud cannot only not cover these positions without financial collapse but
they can’t even stop the daily onslaught without risking the share price going up. The allure of free investor money is so overwhelming that prudent short selling practices fall by the wayside.
23) For the most part, naked short sellers don’t ever cover; they don’t have to. They can always fall back on their ace in the hole as a “Participant” of the DTCC by refusing to execute even buy-ins mandated by the old NASD Rule 11830 as well as the new Reg SHO because of possible market “Disruptions”. The financial critical mass of these hedge funds and co-conspiring Wall Street behemoths will outmuscle even the most formidable preyed upon targets. If they meet resistance then there are available “Internet bashers” to employ and financial “Journalists” for hire to produce “Hatchet jobs” to propagate any negative stories whether of merit or not. First Amendment freedom of speech issues as well as Internet anonymity are utilized to delivery any unfavorable opinions.
24) The key to naked short selling fraudsters is to get these trades involving the sale of nonexistent shares to “Clear” even though “Settlement” (Which involves the “delivery” of that which was thought to be being bought i.e. genuine “shares” or
“packages of rights” attached to a specific U.S. Corporation) may never occur. The “Automated Stock Borrow Program” at the DTCC allows shares held in “Street name” at the DTCC to be borrowed from an anonymous “Lending Pool” of shares. This allows the firm of the buyer of these nonexistent shares to receive delivery of “something” that at least resembles a legitimate share at first glance. The problem is that the buying firm is allowed to immediately place these “Shares
or share facsimiles” right back into this same anonymous “Lending pool” of shares AS IF THEY NEVER LEFT IN THE FIRST PLACE. THE BUYING FIRM IS THEN HANDSOMELY REWARDED BY THE DTCC WITH THE CASH EQUIVALENT OF THE SHARES DEPOSITED INTO THE POOL AND CHOSEN TO CLEAR THE NEXT FAILED DELIVERY. THIS WONDERFUL ABILITY TO CONVERT A CLIENT’S PURCHASES OF REAL SHARES OR “PSEUDOSHARES” INTO CASH FOR THE USE OF THE BROKER/DEALER PROVIDES PLENTY OF INCENTIVE TO KEEP THE “LENDING POOL” FULL TO CAPACITY. THE SELF-REPLENISHING ASPECT ALSO HELPS
KEEP IT FULL TO ADDRESS AS MANY “FAILED DELIVERIES” AS THE
SYSTEM WILL GENERATE WHICH IS AN INFINITE AMOUNT IF NO
REGULATOR MONITORS FOR THE APPROPRIATENESS OF THE USE OF
THE “BONA FIDE” MM EXEMPTION FROM BORROWING BEFORE SHORT SELLING.
25) The “Counterfeit Electronic Book Entries” (“CEBEs”-electronic book entries at the DTCC without a certificated share in a DTCC vault to justify its existence) that result from the lack of buying-in these failed deliveries then appear on investors’ monthly statements as readily-sellable “Pseudo-shares” despite the fact that there is no paper certificate in a DTCC vault to justify its existence. Keep in mind that the DTCC at all times has full visibility of the number of “CEBEs” as well as genuine shares held in their vaults.
26) The “Supply” variable that interacts with the “Demand” variable to determine share price then becomes the arithmetic sum of all genuine paper-backed electronic book entries at the DTCC plus the number of “Counterfeit Electronic Book Entries”. This greatly enhanced “Supply of readily-sellable shares” then
interacts with a greatly diminished “Effective Demand” for shares due to buy orders for shares being effectively neutralized by the sale of nonexistent shares into these buy orders resulting in the typical precipitous drop in the share price of the preyed upon U.S. Corporation. This allows the unknowing investors’ funds to flow into the lap of those that sold nonexistent “Entities” but still refuse to cover.
27) The 2 main repositories for these unaddressed delivery failures are the DTCC “D” sub accounts and the “Non-CNS delivery arrangements” shunted to “Exclearing” hiding places. The “Ex-clearing” hiding places involve DTCC participants “Pairing off” and allegedly informally agreeing to not buy-in each other’s failed deliveries. B/d “A” agrees to not demand delivery of the $5 billion worth of securities owed to it by B/d “B” in exchange for B/d “B” doing likewise with the $5 billion worth of failed deliveries owed to it. The DTCC holds that these are “Contractual” arrangements between its participants and that it has no business in monitoring. Victimized issuers and investors might beg to differ as any “Self-Regulatory Organization” might be expected to do a little “Selfregulating” of the activity of its participants which unfortunately at the DTCC own the DTCC. The DTCC management aggressively regulating the behavior of those that sign their paychecks is a bit of a design flaw creating yet another conflict of interest.
28) Section 17 A of the ’34 Act set up the DTC which later merged with the NSCC to form the DTCC. It mandated “The prompt and accurate clearance AND SETTLEMENT of transactions involving the transference of ownership”. Even in the Reg SHO environment the trades done by naked short selling fraudsters still aren’t “settling”. “Settlement” mandates “Good form delivery” of that which was intended to be purchased by the buyer-a “Package of rights” attached to a specific U.S. corporation domiciled in a specific U.S. state. You cannot have “Good form
delivery” if that which is being “Delivered” comes from a self-replenishing “Lending pool” of shares provided by the DTCC’s “Automated Stock Borrow Program” (the SBP) especially when that which is delivered to the new buyers broker/dealer can immediately be replaced right back into the same “Lending
pool” from whence it just came as if it never left at all. In order for a system like this to have one scintilla of integrity, the “Shares/pseudo-shares” delivered to the
new buyer’s brokerage firm would be sequestered or escrowed off to the side and not allowed to be replaced into the “Lending pool” UNTIL the original loan was repaid.
29) What our current system does is to allow trades to “Clear” at warp speed without legally “Settling”. Dr. Boni’s research clearly showed the “Pervasiveness” and extreme age of the failed deliveries stacking up at the DTCC. This vastly dilutes the “Readily-sellable” share structure of targeted corporations causing their share price to plummet which allows the proceeds from the sale of bogus shares to actually flow into the laps of the fraudsters despite their having absolutely no intent of ever buying or replacing that which they have already sold. Recall that all the fraudsters have to do is to collateralize this ever-diminishing debt on a daily “Market-to-market” basis.
30) If the SEC is sincere about addressing this problem, I would suggest they start with legislation to rescind Section 19 C of the ’34 Act which currently forbids the SEC from altering the rules and regulations of the DTCC. The combined 800-pages of rules and regulations of the DTC and NSCC, in my humble opinion, is the most conflict of interest-ridden set of rules on the planet. The lack of necessity to execute buy-ins mandated by the old NASD Rule 11830 and the new Federally mandated Reg SHO threshold securities buy-ins due to the pretense of avoiding “Market disruptions” is in the opinion of most securities scholars nothing short of criminal as by definition there has to be a “Market disruption” involved when leveling the playing field of a victimized issuer that has lost 99% of its market capitalization due to abusive naked short selling by DTCC participants hiding behind their rulebook that is untouchable by the SEC. In summary, this NASD Rule 3360 proposed rule change represents a step in the right direction especially if made a part of a more comprehensive plan that addresses the loopholes inadvertently left in Reg SHO. The systemic risk levels currently being incurred by all U.S. citizens due to the greed of abusive DTCC participants and coconspiring hedge funds and naked short selling cartels is intolerable. The inability for Reg SHO to address the preexisting delivery failure problem hints at just how serious and pandemic this problem is. The voluntary “Grandfathering in” of previous acts of securities fraud sets a very scary precedent. As I see it, you at the SEC have run out of
comfortable middle ground to occupy in this dilemma. You now see the absolute numbers of delivery failures of a given issuer on a daily basis. You either have to warn prospective buyers, as per the ’33 “Disclosure Act”, of these levels of “Readily sellable share facsimiles” (unaddressed delivery failures) being held at the DTCC or in “Exclearing arrangements” IN ALL OTC SECURITIES or order their being bought-in. There is no third choice. These prospective investors need to be warned that they’re buying shares of corporations with astronomic levels of unaddressed delivery failures which have basically pre-ordained their investment to an early death as statistics will readily bear out. The 1933 Securities Act mandates that investors be made aware of all information pertinent to the “Character” of the securities being sold in our markets. In a prospectus you at the SEC appropriately make a new issuer reveal every possible tiny grain of sand of risk to the investing public yet you at the SEC, the NASD, and the DTCC
possess information about a gigantic “Boulder of risk” present in investing in especially nonreporting issuers with a plethora of unaddressed delivery failures, yet you keep silent. Note that the Reg SHO “Threshold lists” don’t even discriminate between a corporation with a 0.6% delivery failure rate from a corporation with a 66% delivery failure rate. There really is no middle ground left on this landscape strewn with corporate carcasses for the SEC to safely stand on any longer. Either tell us about these positions as the amended 3360 would partially address or buy-in the failed deliveries. If mandated buyins result in the weeding out of the most abusive market making and clearing firms then so be it. This might allow our markets to evolve into more efficient computerized markets not subject to human greed and massive conflicts of interest between DTCC participants and the investors they owe a fiduciary duty of care to. Thank you for your interest in this subject.
Dr. Jim DeCosta
Tualatin, Oregon
______________________________________________
Great job. This is a great addition to i-Hub.
Well, here it is. This is the "free-zone" version of my premium shorting/naked shorting/reg.SHO board.
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