Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Is Time Running Short in StockGate Scandal?
by Mark Faulk
For the past eight months, The Faulking Truth has reported on the massive naked short selling scandal that has plagued the stock market for years. It has been called by many "the biggest financial scandal in the history of the world". During that time, dozens of lawsuits have been filed by both companies and stockholders who claim that their companies have been systematically destroyed by the practice of naked short selling. They claim that brokers, through their wholly owned clearing house system, the Depository Trust Corporation (DTCC), have effectively been creating counterfeit shares of stock through their "Stock Borrow Program", which allows brokers to "borrow" the same shares over and over again, artificially inflating the share count and driving the price of the stock down. They also claim that the governing body that has been entrusted with the task of protecting the individual investors, the self-proclaimed "Investor's Advocate", the SEC, has failed to protect investors, and has succumbed to pressure from the brokers who profit from the naked short selling scandal.
The major media has been slow to cover this scandal, and until now, except for a few random articles from publications such as The Wall Street Journal, Forbes Magazine, and Dow Jones Newswire, this story has been left to independent publications such as The Faulking Truth and Financialwire.net. On June 11, in a Faulking Truth exclusive, we reported that NBC's Dateline was planning a major expose on the stock market scandal, filming over 100 hours of interviews and footage while putting together a segment that our inside sources said would "blow the roof off of this scandal". Originally scheduled to air in January or early February, rescheduled for August, and then postponed yet again, many critics and bashers claimed the segment was shelved for good, especially after a case brought by JagMedia, and filed by an attorney in the Houston law firm of O’Quinn, Laminack, and Pirtle, was dismissed earlier this month by Houston Judge Vanessa Gilmore, citing "repeated filing deficiencies". It was fodder for the message boards and the numerous websites that have recently sprung up in an effort to negate the progress made by this publication and others who have continued to report on the scandal. Even those activists who have continually pushed for major stock market reform and a full congressional investigation into the SEC were disheartened by both the lawsuit dismissal and Dateline's refusal to air the segment or even confirm that they were still planning to air it.
Dateline Confirms StockGate Segment
It seems that both concerns are unfounded. One source close to the Dateline story told us this week that the segment would air "in the next two to three weeks", and that there is a "90% chance that it will air before the Presidential election on November 2nd." According to this source, who is heavily involved with the segment, "the Dateline story is imminent". Another source told us that while they would "be surprised if it aired before the election", that the segment was nearing completion.
I've been emailing and calling Dateline for months with no response (not even a courtesy "no comment"), so I decided to try a different approach. I emailed Sharon Hoffman, the producer who is in charge of the stock market scandal segment for Dateline, and phrased my question like this:
Sharon,
I have information that you are planning to air the segment on the stock market scandal "sometime in the next three weeks". My sources, which are extremely credible, have told me that they are "90% certain that it will air before the election on Nov. 2".
As always, I would love to have some kind of confirmation from you that this is accurate. In fact, let me phrase it this way: If you do not respond to this email, I will assume that my information is accurate and that you have no comment on the story I am writing.
Low and behold, Sharon Hoffman sent me this email a couple of hours later:
Mr. Faulk:
Thanks for your email. We are, in fact, still shooting interviews for the story, and it does not yet have a scheduled air date. I will definitely email you to alert you to the air date as soon as I know what it is, since I know you and your readers have a strong interest in the subject.
Regards,
Sharon Hoffman
In answer to my followup question about whether the segment will air before the election, Hoffman told me that "there is a chance we'll air before the election, but also a chance that we won't. I'll let you know when I know."
It's finally "official". The Dateline stock market scandal segment is still on, and our readers will know the scheduled air date as soon as we do. (Thanks, Sharon, we need all the help we can get.)
Lawsuits Still Being Filed
So, what about the JagMedia lawsuit dismissal, and the others still pending? According to our sources at the law firm handling the case, the JagMedia case was filed independently by an associate attorney with O'Quinn, Laminack, and Pirtle, and not by O'Quinn himself, so the attorney didn't have access to the 100 person investigative and research team that O'Quinn and Wes Christian (of Christian, Smith, Wukoson and Jewell) have assembled to put together their cases. In fact, O'Quinn and Christian have a total of 20 cases currently pending, with five more scheduled to be filed in the next thirty days. According to our source, they intend to eventually file a total of 50 to 100 lawsuits involving the naked shorting scandal. In one case, involving Nanopierce, they have won a favorable ruling to have the case tried in state court (instead of federal), and have received "favorable rulings and begun the deposition and discovery process" on another case.
While the O'Quinn/Christian cases have received the most publicity, many others have begun springing up around the country. One, filed by a majority stockholder with Trident Systems, Inc., is suing the DTCC, Knight Securities, ETrade, Morgan Stanley, Waterhouse, Bear Stearns, and Goldman Sachs, claiming that they utilized the "Stock Borrow Program" to defraud stockholders of that company. Another lawsuit has been filed by NanoSignal Corp. shareholder Gary Walters against the DTCC and Knight Securities, claiming that they "shorted 447 million shares of our stock", more than double the total outstanding shares, and have failed to deliver those shares.
States Getting Involved
We have also confirmed that several states have opened investigations into the naked short selling scandal, including Nevada , Washington, California, Florida, and Louisiana. In fact, Louisiana has filed a criminal subpoena against Paine Webber for failure to deliver shares of Nutek, a Las Vegas, Nevada holding company. According to our sources, several other states are considering similar investigations.
This is a story that just won't go away. Judging by the numerous lawsuits already filed, the steady stream still being filed, the state investigations just getting under way across the country, and the publicity certain to follow the Dateline story, this issue is picking up speed. It's just a matter of time before the true facts are revealed. For those who are involved in the massive fraud that's been perpetuated upon the stockholders of America, time is truly running "short".
http://www.faulkingtruth.com/Articles/Investing101/1011.html
- Is Time Running Short in StockGate Scandal?
For the past eight months, The Faulking Truth has reported on the massive naked short selling scandal that has plagued the stock market for years. It has been called by many "the biggest financial scandal in the history of the world". During that time, dozens of lawsuits have been filed by both companies and stockholders who claim that their companies have been systematically destroyed by the practice of naked short selling. They claim that brokers, through their wholly owned clearing house system, the Depository Trust Corporation (DTCC), have effectively been creating counterfeit shares of stock through their "Stock Borrow Program", which allows brokers to "borrow" the same shares over and over again, artificially inflating the share count and driving the price of the stock down. They also claim that the governing body that has been entrusted with the task of protecting the individual investors, the self-proclaimed "Investor's Advocate", the SEC, has failed to protect investors, and has succumbed to pressure from the brokers who profit from the naked short selling scandal.
The major media has been slow to cover this scandal, and until now, except for a few random articles from publications such as The Wall Street Journal, Forbes Magazine, and Dow Jones Newswire, this story has been left to independent publications such as The Faulking Truth and Financialwire.net. On June 11, in a Faulking Truth exclusive, we reported that NBC's Dateline was planning a major expose on the stock market scandal, filming over 100 hours of interviews and footage while putting together a segment that our inside sources said would "blow the roof off of this scandal". Originally scheduled to air in January or early February, rescheduled for August, and then postponed yet again, many critics and bashers claimed the segment was shelved for good, especially after a case brought by JagMedia, and filed by an attorney in the Houston law firm of O’Quinn, Laminack, and Pirtle, was dismissed earlier this month by Houston Judge Vanessa Gilmore, citing "repeated filing deficiencies". It was fodder for the message boards and the numerous websites that have recently sprung up in an effort to negate the progress made by this publication and others who have continued to report on the scandal. Even those activists who have continually pushed for major stock market reform and a full congressional investigation into the SEC were disheartened by both the lawsuit dismissal and Dateline's refusal to air the segment or even confirm that they were still planning to air it.
Dateline Confirms StockGate Segment
It seems that both concerns are unfounded. One source close to the Dateline story told us this week that the segment would air "in the next two to three weeks", and that there is a "90% chance that it will air before the Presidential election on November 2nd." According to this source, who is heavily involved with the segment, "the Dateline story is imminent". Another source told us that while they would "be surprised if it aired before the election", that the segment was nearing completion.
I've been emailing and calling Dateline for months with no response (not even a courtesy "no comment"), so I decided to try a different approach. I emailed Sharon Hoffman, the producer who is in charge of the stock market scandal segment for Dateline, and phrased my question like this:
Sharon,
I have information that you are planning to air the segment on the stock market scandal "sometime in the next three weeks". My sources, which are extremely credible, have told me that they are "90% certain that it will air before the election on Nov. 2".
As always, I would love to have some kind of confirmation from you that this is accurate. In fact, let me phrase it this way: If you do not respond to this email, I will assume that my information is accurate and that you have no comment on the story I am writing.
Low and behold, Sharon Hoffman sent me this email a couple of hours later:
Mr. Faulk:
Thanks for your email. We are, in fact, still shooting interviews for the story, and it does not yet have a scheduled air date. I will definitely email you to alert you to the air date as soon as I know what it is, since I know you and your readers have a strong interest in the subject.
Regards,
Sharon Hoffman
In answer to my follow-up question about whether the segment will air before the election, Hoffman told me that "there is a chance we'll air before the election, but also a chance that we won't. I'll let you know when I know."
It's finally "official". The Dateline stock market scandal segment is still on, and our readers will know the scheduled air date as soon as we do. (Thanks, Sharon, we need all the help we can get.)
Lawsuits Still Being Filed
So, what about the JagMedia lawsuit dismissal, and the others still pending? In an article just released by www.financialwire.net , O'Quinn partner Tom Pirtle commented on the case. "'We are obviously disappointed with Judge Gilmore's ruling,' said Pirtle, a partner at O'Quinn, Laminack & Pirtle. 'While this is a setback, we firmly believe JAG Media and its stockholders have been victimized and damaged by the seemingly never ending daisy-chain of failed settlements in the company's stock. We have met with the Company to review Judge Gilmore's ruling and are currently working closely with the Company to determine the best strategy for re-initiating claims against responsible parties in light of the court's ruling,' added Pirtle."
However, according to Wes Christian of Christian, Smith, Wukoson and Jewell, who is partnering with John O'Quinn in the naked short selling lawsuits, the JagMedia case was filed independently by an associate attorney with O'Quinn, Laminack, and Pirtle, and not by O'Quinn himself, so the attorney didn't have access to the 100 person investigative and research team that O'Quinn and Christian have assembled to put together their cases. In fact, O'Quinn and Christian have a total of 20 cases currently pending, with five more scheduled to be filed in the next thirty days. According to our sources, they intend to eventually file a total of 50 to 100 lawsuits involving the naked shorting scandal. In one case, involving Nanopierce, they have won a favorable ruling to have the case tried in state court (instead of federal), and have received "favorable rulings and begun the deposition and discovery process" on another case.
While the O'Quinn/Christian cases have received the most publicity, many others have begun springing up around the country. One, filed by a majority stockholder with Trident Systems, Inc., is suing the DTCC, Knight Securities, ETrade, Morgan Stanley, Waterhouse, Bear Stearns, and Goldman Sachs, claiming that they utilized the "Stock Borrow Program" to defraud stockholders of that company. Another lawsuit has been filed by NanoSignal Corp. shareholder Gary Walters against the DTCC and Knight Securities, claiming that they "shorted 447 million shares of our stock", more than double the total outstanding shares, and have failed to deliver those shares.
States Getting Involved
We have also confirmed that several states have opened investigations into the naked short selling scandal, including Nevada , Washington, California, Florida, and Louisiana. In fact, Louisiana has filed a criminal subpoena against Paine Webber for failure to deliver shares of Nutek, a Las Vegas, Nevada holding company. According to our sources, several other states are considering similar investigations.
This is a story that just won't go away. Judging by the numerous lawsuits already filed, the steady stream still being filed, the state investigations just getting under way across the country, and the publicity certain to follow the Dateline story, this issue is picking up speed. It's just a matter of time before the real facts are revealed. For those who are involved in the massive fraud that's been perpetuated upon the stockholders of America, time is truly running "short".
by Mark Faulk
CTV News .... Peter Murphy on Canadian Diamonds.
http://www.ctv.ca/servlet/HTMLTemplate/!ctvVideo/CTVNews/canada_diamonds_040113/20040113/?video_link...
U.S. Canadian Minerals to Release Schedule for Funding
10/5/04
LAS VEGAS, Oct 5, 2004 (BUSINESS WIRE) --
U.S. Canadian Minerals, Inc. (OTCBB:UCAD) announced today that it will be releasing the timetable for completion of the previously announced funding transaction with a London based private investment company within the next few days. Upon public release of information by the
private investment company, UCAD will provide further details.
John S. Woodward, President of UCAD stated: "We are eagerly awaiting completion of this transaction as it will allow us to continue on our path of rapid growth and acquisition."
Further details will be forthcoming in future press releases and at http://www.uscanadian.net/.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Statements contained in this document which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements.
SOURCE: U.S. Canadian Minerals, Inc.
U.S. Canadian Minerals, Inc. Chris Henneman, 303-220-8476
Copyright (C) 2004 Business Wire. All rights reserved.
Look at that UCAD !!!!
http://www.stockscores.com/quickreport.asp?ticker=ucad
Shore adds more Star sparkle
2004-10-05 12:33 ET - Street Wire
by Will Purcell
Shore Gold Inc. has a new set of diamonds from its bulk sample of the Star kimberlite. The company's shares hit a high of $3.15 in intraday trading just hours before Shore revealed its latest numbers, but the stock dipped to a low of $2.62 after the news. Despite the pessimistic reaction, the latest results include another haul of large diamonds and the best individual sample grade so far. As well, the average sample grade continues to climb, adding to the expectations for the richer kimberlite phase at Star.
The latest samples
Shore's four new lots of kimberlite weighed 1,005 tonnes and the rock produced nearly 200 carats of diamonds. That was good enough for an average grade of nearly 0.20 carat per tonne. Once again, it was the southeastern drive at the 235-metre level that produced the best results.
Nearly 774 tonnes of rock from that lucrative southeastern zone had an average grade of about 0.21 carat per tonne, while 231.6 tonnes of material from the north drive produced a grade of 0.15 carat per tonne. The southeastern tally got a hefty boost from a 184-tonne batch, which delivered 60 of the carats and a sample grade of one-third of a carat per tonne.
That confirms Shore's expectation that there would be pockets within the mammoth Star pipe that would have grades above 0.30 carat per tonne. As well, that sample also accounted for the largest three diamonds in the latest series of samples. The haul included a 12.84-carat stone, which ranks third in weight among all the Star gems. The one rich lot of kimberlite also contained diamonds weighing 8.33 carats and 4.05 carats.
It is difficult to find any unexpected disappointment in the latest samples. Shore classified about 73 per cent of the latest diamond parcel as white and another 15 per cent met an off-white classification.
Those proportions are a bit lower than Shore found at the start of its big test, but the result is better than the last set of samples. Further, the proportions are about average for the sample as a whole.
The description of the largest two diamonds was uninspiring. The 12.84-carat stone was off-white, while the eight-carat diamond was grey. Most of Shore's earlier large finds met a white classification, including all four of the stones larger than eight carats. Still, the colour and characteristics of any single diamond will matter little to the outcome.
Another potential concern in the latest result is the absence of any particularly large diamonds in the remaining three 250-tonne batches. There were no diamonds larger than three carats in those batches. Previously, 16 of the 27 batches of early Joli Fou kimberlite produced at least one diamond larger than three carats.
Nevertheless, the latest samples display a healthy diamond size distribution. Stones larger than one carat probably accounted for close to 75 carats of the 196 carats in the current test, and that 37-per-cent proportion is actually higher than the average of the earlier samples.
The encouragement
The best of the diamond grades come from the early Joli Fou kimberlite and the best rock within that phase comes from the portions taken from the southeastern drift at the 235-metre level. Shore has processed 3,841 tonnes of the material so far, and the rock yielded 826 carats. That suggests a grade of more than 0.21 carat per tonne.
Shore initially hoped its Star diamonds would be worth $100 (U.S.) per carat, based on results from a rival play to the north. The diamond size distribution is healthier than hoped and Shore's vice-president of exploration, George Read, has been more optimistic of late. The Saskatoon-based diamond hunter now believes that a value of $125 (U.S.) per carat could prove conservative.
If he is right and the rosy southeastern grade holds up, it would bode well for the project. A grade of 0.20 carat per tonne and a diamond value of $150 (U.S.) per carat combine to a rock value of $30 (U.S.) per tonne. Mr. Read and his company also tout operating costs of about $10 (U.S.) per tonne for a theoretical Star mine. That would leave a healthy profit margin, should the optimistic values prove accurate.
The lingering concern
Shore's samples from other parts of the pipe have not matched the grades that have come from the southeastern drifts at the 235-metre level. As well, there have been markedly fewer large diamonds from other parts of the pipe containing the early Joli Fou phase of kimberlite.
Shore processed five batches from the northern and northeastern parts of the 235-metre level and it collected 10 other samples while excavating the shaft. Of those 15 lots of kimberlite, only five had a grade of more than 0.14 carat per tonne.
Shore processed 16 batches of kimberlite from the southeastern zone so far, and all of them yielded grades greater than 0.14 carat per tonne. Four of those samples have an average grade of more than 0.30 carat per tonne.
The material from the early Joli Fou phase away from the southeastern drift weighed about 4,700 tonnes. The rock produced about 570 carats, yielding an average grade of 0.12 carat per tonne. Even that figure could carry some promotional oomph if it is combined with a toutable diamond value, but signs of a more modest size distribution curve accompanied the lower grade.
The largest diamond from the 4,730 tonnes of material weighed a respectable 6.41 carats and a second stone came close, at 6.23 carats. Still, there were at least 10 diamonds that weighed more than 6.41 carats recovered from just 3,840 tonnes of kimberlite from the richer southeastern zone.
The average diamond sizes within the other zones provide another clear sign of the variations in the diamond size distributions within the pipe. The average stone from the southeastern drift weighed an impressive 0.147 carat, while a typical diamond from the other areas containing early Joli Fou kimberlite weighed just 0.092 carat.
That trend continues into the late Joli Fou phase in the upper part of Star. That material has a clearly uneconomic grade of about 0.025 carat per tonne and the average diamond weighs just 0.062 carat. That works out to about 40 per cent of the weight of the average stone from the southeastern drift.
It is hardly unusual for zones with richer grades to also have coarser diamond size distributions. In fact, such a combination is good news, as it would logically contribute more value to a deposit than if the largest diamonds came from poorer parts of the pipe. There is little doubt the kimberlite from the southeastern drift is potentially economic, but just how extensive is that zone will be the lingering question after the sample is complete.
The complete tally and beyond
Shore has processed 13,129 tonnes of kimberlite so far, recovering 1,591 carats, or just over 0.12 carat per tonne. At that rate, Shore would just top its target of 3,000 carats, but it will be a big surprise if the company fails to beat the goal handily.
The remaining kimberlite is coming from the early Joli Fou phase, and the remaining 12,000 tonnes of rock should produce close to 2,000 carats, bringing the final tally to about 3,500 carats. If Shore continues to process richer rock, the final carat count could climb even higher.
That will provide more than enough diamonds for a proper evaluation, but the outcome will be unrepresentative of the actual grade of Star, as Shore has intentionally tested the more favourable regions within the pipe. Still, the continuing test delivers increasing confidence the grade of the early Joli Fou phase will be more than enough to advance the project to the next stage.
A typical batch of rock from the early Joli Fou phase has a grade of about 0.12 carat per tonne. None of the 31 individual kimberlite samples had a grade below 0.09 carat per tonne and eight batches produced grades above 0.20 carat per tonne. As a result, there is a good chance the average grade of the early Joli Fou phase will be 0.15 carat or more.
Shore expects to have a value for its diamonds this year, and that will be the main focus of speculators in the coming months. Nevertheless, coming up with a resource calculation for a wide portion of Star will be an important part of the next stage at Star, and that should take a significant amount of drilling.
The players
Drilling will take cash, but money will not be a problem for Shore. The company took advantage of its healthy share price, completing the sale of 12.56 million units at $2.20. The financing added $27.6-million to Shore's treasury, enough to advance Star significantly.
Benny Steinmetz and Brian Menell's Magma Diamond Resources Ltd. bought 1.2 million of the new units, preserving its 9.4-per-cent stake in Shore. Magma hopped onto the Star bandwagon in the summer of 2002 when it bought 2.5 million of Shore's shares and warrants, then priced at 75 cents per unit.
As a result Magma's chief executive officer, Mr. Menell, popped up on Shore's board early in 2003. Diamonds are nothing new for Mr. Menell, who has been involved in most aspects of the gem business for well over a decade, including eight spent with De Beers.
Mr. Steinmetz is also a principal of Bateman Engineering, which is a shareholder of Magma and is the company that constructed Shore's processing plant. Shore bought the remaining 50-per-cent interest in the plant from Bateman this summer, after Magma exercised its 2.5 million warrants.
Shore shed a dime on Monday, closing at $2.59.
SEC Forum Adopts Investrend Research Proposal to Clarify 17(b)
An Investrend Research proposal for the U.S. Securities and Exchange Commission to clarify Regulation 17(b), including confusion about the requirements of public issuers for full compensation transparency, has been adopted by the annual SEC Business Forum on Small Business Capital Formation, and will be placed in its minutes for submission to the Commissioners.
The proposal had been opposed by research provider John Dutton, who told the SEC “there is no crisis in disclosure.” Meanwhile, Dutton was cited by BusinessWeek for providing incomplete disclosure for his coverage of EasyLink (NASDAQ: EASY), currently under SEC investigation, and his firm’s coverage of companies such as Nymox Pharmaceuticals (NASDAQ: NYMX), which sometimes bypasses compensation disclosures in its own announcements. Other recent similar announcements lacking complete compensation disclosures were issued by GWIN, Inc. (OTCBB: GWIN) and International Fuel Technology (OTCBB: IFUE).
Investrend Research counsel Marshal Shichtman, Esq. (see photo) spearheaded the proposal through the “Smaller Public Companies” committee of the Forum.
The U.S. Securities and Exchange Commission Regulation 17(b) states:
“It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.”
In queries to the SEC, John Nester, a spokesperson, confirmed that there is no clarity on the responsibilities of public companies under 17(b).
Subsequently, Investrend Research contacted the CFA Institute and National Investor Relations Institute to ask to amend its comments to their joint panel considering Guidelines for issuer-paid research to require public companies to disclose compensation arrangements in any public announcements of reports issue by independent research providers.
While not identifying his source, a spokesperson for Dutton recently stated, “The (SEC) staff has confirmed that Section 17(b) only requires disclosure by persons who have received compensation (or other consideration) for the publication of information regarding a company, such as a research report or a press release.
“For example, while a press release issued by J M Dutton would require Section 17(b) disclosures if the press release related to a company that had paid J M Dutton for research coverage; however, a press release issued by a company that had retained Dutton … would not.
“There is no duty under 17(b) for a company that has retained an independent research firm to disclose the fact that it has done so …,” he concluded.
While officials at the SEC said they had no memory of talking to anyone representing Dutton, they subsequently told FinancialWire that the SEC indeed has not clarified whether public companies can circumvent the transparency of disclosure by issuing a press release about coverage by a paid research provider instead of the research provider issuing the announcement itself.
According to the SEC, there appears to be no definitive interpretation of Regulation 17(b) that would prevent disclosure circumventions.
Investrend has also asked the National Investor Relations Institute and CFA Institute joint panel developing guidelines for independent research providers for permission to amend its March 20 comments to ask the panel to require public company issuers “to make all disclosures contemplated by Regulation 17(b), whether or not the SEC has issued an authoritative interpretation or the company’s counsel states that it does not have to do so by law.”
The SEC has told FinancialWire that Regulation 17(b) means full and complete compensation for research and any other services provided, including amounts and sources, must be disclosed in “every press release” as well as other published documents. The SEC states that third party compensations must include the relationship of the payer to the issuer.
In an email to FinancialWire, John J. Nester, a spokesperson for the U.S. Securities and Exchange Commission, confirmed that regulators interpret 17(b) to mean that specific compensation information must be contained in press releases, and that a link to a disclosure somewhere else, for example, is a violation of the regulation. He further stated that the compensation disclosure required by the SEC includes “amounts and sources in any press release mentioning the company under research coverage.”
The SEC had previously told FinancialWire that it intends to enforce these provisions so that investors may have a fully transparent understanding of any potential agenda or lack thereof.
In a January 2000 research report, for example, the SEC said outside analyst Paul Bornstein, who it has charged with 17(b) violations and fraud, “failed to disclose that at least part of Bornstein's optimism about CyberCare (OTC: CYBR), then on the NASDAQ (OTCBB: NDAQ), resulted from his simultaneous employment by CyberCare's public relation's firm.
In subsequent communications with Nester, the SEC’s spokesperson, he appeared to equivocate on the subject of whether public companies bear the same disclosure responsibilities as do the research firms covering them. While stating he had no recollection of any conversations with Dutton or his firm’s lawyers, Nester said there is currently no authoritative interpretation from the Commission as to public disclosure transparency by public companies themselves.
While independent research by standards-driven providers are “growing in legitimacy,” according to the Dow Jones (NYSE: DJ) in a recent article that singled out Investrend Research in that category, the article went on to quote Lou Thompson, president of the National Investor Relations Institute, which had issued new Guidelines in 2002 endorsing legitimate “paid-for” research, as warning of “various mutations of paid-for research."
The SEC Forum is the annual event mandated by Congress to secure opinions and recommendations from public issuers, financial industry professionals and the public.
http://www.investrend.com/articles/defaultFinancialWire.asp?level=160
A Twelve Step Program to Clean up the OTC Stock Market –
October 3, 2004
by Mark Faulk of Faulking Truth
Let's face the facts: the OTC stock market is a shambles, and if someone doesn't do something about it soon, it will be lucky to survive. It's like a neighborhood that's been allowed to fall into disrepair for decades, if the neighborhood association (the SEC, NASD, and DTC, in this case) doesn't do anything to make the neighborhood safer and more desirable, then all the respectable homeowners will move out, and the only ones left will be drug dealers, gang-bangers, and crack whores. And since the stock market's equivalent of a "neighborhood association" seems content to watch from the sidelines (or, as some critics contend, align themselves with the riffraff that is looting the neighborhood), it's up to the remaining "homeowners" and neighborhood activists to step in and take back their own neighborhood.
We have to demand that the criminals are arrested, that the laws are enforced (and if the existing laws aren't adequate to address the problems, that new laws are introduced), and that the streets are cleaned up. In other words, it's time to make sweeping changes in OTCLand, and if those in charge aren't up to the task, then it's time for new leadership.
Does anyone here really believe that the SEC gives a damn about the small investor? The truth is, they (and the NASD, the DTC, the market makers, and the brokers themselves) all get a cut every time a neighborhood con artist rips off one of the locals. The only trouble is, once they've fleeced the remaining available victims, the neighborhood will be in such disrepair that no new money will ever get invested into it again. And once that happens, once the money stops flowing, then everyone loses.
So, on the outside chance that someone "up there" really wants to reform the OTC stock market for the betterment of the small investor and the legitimate companies who are struggling to survive in a rigged game, I've taken the liberty of making a few suggestions about how to clean up this neighborhood. You may or may not agree with all of them, but until we begin the process of reform in our markets, our "neighborhood" will continue to deteriorate until it becomes essentially worthless.
1. Stop naked short selling altogether. Demand that every broker cover every short sell, and I'm not talking about the electronic shell game that they are allowed to play now. One share, signed, sealed, and delivered, to cover every share that's shorted. That one's a given, if the SEC, the NASD, and the DTC are allowing stocks to be sold short without finding the shares to cover those positions, then they are complicit in the crime. Period. We've written a bunch of articles on this issue, so I won't belabor the point here. For those of you who have been hiding in a cave in Afghanistan for the past year, read "Financial Terrorism in America", for an in-depth analysis of this issue, or, if you have an entire afternoon to kill, read all of the plethora of articles we've written on the subject. http://www.faulkingtruth.com/Articles/Investing101/1001.html
2. Publicly report all legitimate short selling information. It should be as easy as a click of the mouse to find out the number of shares that are short in any given OTC stock at any time. The records are there, why doesn't the DTC release them in order to protect investors? If they can do this on listed stocks, then they can do it on OTC stocks. And while we're at it, why don't we require holders of substantial short positions to publicly disclose those positions? We require those who hold substantial long positions to disclose it, what's the difference? The more information we have, the better our investment decisions will be. Duh.
3. Eliminate all offshore and toxic financing, especially floorless convertible funding. I realize that this is the only type of loan that a lot of start-up companies can get, but it's the kiss of death in most cases, in my opinion. If a lending company truly has faith in a start-up company's products, ideas, or technologies, then they should be willing to lend them money at a set rate conversion. That might be at, say, a 25% discount to the current stock price, but at least then all parties involved (the company, investors, and the lender) know exactly what they're getting themselves into. Plus, it takes away the "incentive" for lenders to naked short a stock price into oblivion in order to get their shares for cheaper.
4. Ban all shorting by company insiders and financiers. No one should be able to bet against their own company, or the company that they've loaned money to. It's as simple as that, if the owners, insiders, and lenders are betting that the stock will go down, why should anyone else invest in that company?
5. Require approval from the true owner of shares before those shares can be "borrowed". This is one that will undoubtedly piss off everyone who makes their living betting that every stock in the world will eventually drop in price, and you will probably never see this rule happen, but it makes sense. It's your stock; shouldn't you have to give permission before someone "borrows" it? And shouldn't you be somehow compensated for "loaning" your stock to someone else? That simple rule is true in every other aspect of ownership, why not here? It's just one of the many things that doesn't make sense to the average person, and they're right, it doesn't make sense
6. Publicly update outstanding shares and available trading shares on a daily basis. Why isn't this information readily available already? Why do investors have to venture into the jungle of online message boards (such as Raging Bull), just to ask what the float is? Why is the information listed in public filings usually months old? I have seen hundreds of cases where investors were led to believe that a company had, say, 50 million shares outstanding (based on the latest officially released information), only to find out that the actual count had ballooned to 500 million shares or more without any current updated information. This is misleading, and should be illegal, in my opinion. If you can call the transfer agent at any time and find out the current number of shares outstanding, why can't it be posted online?
7. Restrict reverse splits. This is extremely important. If an individual files for bankruptcy, he or she can't declare bankruptcy again for seven years. Why should a publicly traded company be any different? One reverse split is one too many, in my opinion, but multiple reverse splits should be against the law. The most corrupt companies sell hundreds of millions (or even billions) of shares of stock on a regular basis, then declare a reverse split, in effect reducing the number back to near zero, and promptly sell another billion or more shares into the market. In the world of OTC stocks, reverse splits are almost always the kiss of death, especially when they are followed by another round of dilution. I could name a dozen companies off the top of my head that do this for a living (and there are dozens more), but I'm sure every investor has at least one that they've been burned on. Fill in your favorite ripoff company's name here.
8. When a company does declare a reverse split, reduce the number of authorized shares accordingly. In other words, if a company has 500 million authorized shares available, and they sell them all to keep the company afloat, they shouldn't be allowed to declare a reverse split and start all over again. If they are truly declaring a reverse split to reduce the float (say, by enacting a 10 to 1 reverse split to reduce the number of shares to 50 million), then the authorized shares should be reduced proportionately. If they only care about freeing up more shares to sell, let them go to the stockholders for approval.
9. Limit the total number of shares that can be authorized and issued. There's at least one company, CMKM Diamonds (CMKX: OTCBB), that has issued almost a trillion shares of stock, and there's no end in sight. That's just plain crazy, in my opinion. It reminds me of a passage in the "Hitchhiker's Guide To The Galaxy" trilogy (which, in OTC stock market-style, has four books), where all the dregs of society are launched in a spaceship to a far off planet that happens to look just like Earth. One of their first jobs is to come up with a type of monetary system, and the person in charge decides that tree leaves should be their currency. In his report to the committee, he says something to the effect that "the good news is, since we've made leaves our official currency, everyone is rich beyond their wildest dreams. The bad news is that there are so many leaves, it costs a million leaves just for a loaf of bread." Get it? Massive dilution is bad, and no company should be able to sell their shareholders a trillion leaves, I mean shares of stock. There's a reason so many OTC companies are incorporated in Nevada, and it's not the legalized prostitution.
10. Allow shareholders to vote on all important actions affecting their stock. If a CEO, or his cohorts or financiers, controls over 50% of the stock of a publicly run company, then it's not really publicly run, is it? It happens a lot more than one would like to think: a company declares a reverse split, and issues a press release to inform you, but tells you not to bother to vote because they control enough shares to pass it without any stockholder support whatsoever. Instead, limit the amount of voting power any company insiders or financiers have, regardless of how many shares they own. Let the shareholders have a say in how their companies are run (and yes, if they own stock, it is their company).
11. Require more full disclosure for all OTC and pink sheet stocks, and just as importantly, simplify that information. As usual, with any government laws or regulations, it takes 50 pages of legal crap to convey one page of information. This is something every faulking branch of the government should have to do; in my opinion (Can you say IRS?). To all lawmakers and attorneys: if you are feel it is necessary to write every damn thing so that no normal human being can understand it, then write it twice: once in stupid lawyer/politician-speak, and again in plain English, telling us what you really mean. If you're too freaking anal to translate your convoluted legal jargon into normal language, then hire a real person to do it for you. Investors shouldn't have to wade through twenty pages of bullshit just to find the information that is pertinent. What are you trying to hide in the fine print? Give investors a list, in bold print, of pertinent information: How many shares are there? How many shares have been shorted? Has the company ever declared a reverse split? Has the CEO or any of his cohorts been involved in any serious illegal activity, or run any other companies into the ground? Do they ever expect to actually generate any revenues, and if so, when and how much? Do they make a profit, and if not, when do they expect to? See, it's not that hard.
12. Clean up the message boards. Raging Bull, Lycos, and the various other message boards make big money off of the traffic that posters there generate, and they have a moral obligation to protect those posters, in my opinion. It's one thing to allow both negative and positive information to be shared, but message boards (Raging Bull in particular) have become the Wild West. The message boards used to be a great place to find information on OTC companies, now they're just a cesspool and a haven for pumpers and bashers. If the owners of those message boards can't control, at least to a large degree, the obscenities, the personal attacks, the lies, and on and on and on, then they should be shut down. There are several new message boards that have managed to do just that, and they don't have the resources that the big boys have, so there's no question that it can be done. Do it, and quit making excuses. This is not about free speech; it's about honesty and civility.
In the end, the net effect of these rules would be simple. The crooks would pack up and leave town, in search of greener pastures. I'm guessing they would end up as pimps and drug dealers, or possibly politicians or radio talk show hosts. Regardless, once the ability to fleece honest investors is eliminated, these lowlifes would be forced to return to the shadow world where they belong. The crooked CEOs would be forced out of business, the offshore financiers would have to find their suckers elsewhere, some companies would go under, and the legitimate ones (and their stockholders) would be allowed to flourish under a fair and equitable system. The newfound stability would allow small companies (at least the legitimate ones) to secure desirable financing and/or sell their equity for what it's truly worth, and potential investors would at least know the true risks before they invest their hard-earned money into a start-up company.
And that, my fellow neighbors, is the Faulking Truth.
And they all lived happily ever after.
This is a reprint of an Article posted on the Faulking Truth
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2004
Missed this Webb article last Friday ...
CMKM Diamonds mired in outstanding muddle
2004-10-01 21:13 ET - Street Wire
See Street Wire (U-CMKX) CMKM Diamonds Inc
by Lee M. Webb
CMKM Diamonds Inc., a highly touted pink sheet diamond exploration play featuring a funny car dragster as a promotional vehicle, is mired in an apparent muddle over its share structure. Published ratios for two CMKM dividend-in-specie schemes peg the outstanding total at approximately 780 billion shares, but a third dividend-in-specie ratio seems to set the total at an even more staggering 1.56 trillion shares.
Many CMKM shareholders, particularly members of the cult-like following that congregates on an Internet chat site called PalTalk, dismiss any suggestion that the company has anywhere near 780 billion shares outstanding, let alone an outstanding total of more than 1.56 trillion shares.
[snip]
http://new.stockwatch.com/swnet/newsit/newsit_newsit.aspx?bid=U-s0119702-U:UCAD-20041001&symbol=...
October 4, 2004. (FinancialWire) The illegal manipulative trading issue known as “naked short selling” that has embroiled almost the whole of Wall Street, including lawsuits against A.G. Edwards (NYSE: AGE), Citigroup’s (NYSE: C) Citibank, Charles Schwab (NYSE: SCH) and Ameritrade Holding Corp. (NASDAQ: AMTD), found some attention at the recent Securities and Exchange Commission’s Forum on Small Business.
Delegates to the September 20 annual forum passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
The campaign against illegal and manipulative naked short selling suffered a major blow recently as a U.S. District Judge dismissed Jag Media Holdings’ (OTC: JAGH) suit upon a motion by some 75 defendants, including A.G. Edwards (NYSE: AGE) and Citigroup’s (NYSE: C) Citibank.
It left leaders of the campaign disillusioned at the quality of legal work being performed by the vaunted law firms Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, and may have squelched purported plans by General Electric’s (NYSE: GE) Dateline NBC program to air an expose on the naked shorting controversy.
According to Dow Jones (NYSE: DJ) reporter Carol Remond who first broke the story, which still doesn’t seem to have been revealed to the company’s investors and shareholders via either a press announcement or SEC filing, Jag Media and Gary Valinoti, the company's former chief executive, sued over 100 brokerage firms, investment firms and financial institutions in July 2002, alleging that they entered into a civil conspiracy and concert of action to short sell Jag Media's stock.
“In the suit, originally filed in the Judicial District Court, Harris county in Texas and later removed to the U.S. District Court for the Southern District of Texas, Houston Division, Jag Media alleged that the financial institutions committed market manipulation and fraud and violated securities laws,” Remond reported, noting that U.S. District Judge Vanessa Gilmore dismissed the planitiffs’ allegations of securities fraud and illegal short selling because of filing deficiencies, specifically that they “failed to state a claim, failed to allege any wrongdoing by any specific defendants and failed to properly claim fraud.”
The attorneys, including famed lawyer John O’Quinn, apparently had plenty of notice and opportunity to get their acts together. Remond noted that in September, 2003, Judge Gilmore had found that Jag Media failed to establish that all or any of the defendants violated the securities exchange act. Gilmore said that Jag Media's second amended complaint lacked specifics and asked Jag Media to file an amended complaint.
“Jag Media filed its third amended complaint in October 2003. The company alleged in that complaint that its case involves an initial scheme by three of the defendants - Mark Valentine, Thompson, Kernaghan & Co. and CALP II Limited Partnership - to defraud Jag Media into selling convertible preferred stock at less than fair market value. According to Jag Media, this initial scheme was followed by a second scheme in which brokers and market makers manipulated the company's shares for their own profit. Jag Media claimed that the financial firms used various trading tactics such as matched trades, washed trades, ‘painting the tape’ and selling counterfeit, or non-existent shares.”
Stockgate Today, the newsletter of InvestigatetheSEC.com founder Dave Patch said for the “legal teams spearheaded by millionaire Texas lawyer John O’Quinn,” the latest result of those efforts “appears to be a repeat pattern.”
He pointed out that Judge Gilmore’s “scathing ruling” cited “repeated deficiencies in the attorneys’ abilities to file an amended complaint meeting the standards of law.”
He said that despite the article in the Dow Jones, the lawyers had claimed they had heard of no such ruling, leading to Patch to deliver the fatal blow: “The lawyers were the last to know.”
Patch said that the lawyers had “been given over a year, as well as the benefit of a 2003 Order to draft up a third and final filing that met the standards of laws and once again they failed. With that, the lawsuit, and the evidence at hand will not be used in a court of law to determine guilt or innocence. The victims in this case will remain victims for now.”
Patch called the setback an “embarrassment to all the people who fight against the abuses taking place against the lower tier companies and the middle class investors who put their investments in these companies.”
Stockgate, a growing global malady, is being contested on multiple levels, including judicial, legislative and political.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed “serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets.”
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, he said, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced.
“Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales,” Shapiro charged.
“As Regulation SHO now stands, strict requirements to locate and deliver borrowed shares in short sale transactions are directed only to a very small subset of securities, called ‘threshold’ securities, that 1) already have fails to deliver at a registered clearing agency of at least 10,000 shares for five consecutive settlement days, 2) when those failures equal at least one-half of one percent of the outstanding shares, and 3) the security is already included on a daily list of securities meeting these requirements published by an SRO.
“Only when all three of these conditions are met is a broker dealer carrying out a short sale required by Regulation SHO to borrow the security or enter into a bona fide arrangement to do so. These provisions set a new and troubling standard for short sales: A broker can now sell short a security without borrowing the shares or arranging to do so, so long as the security does not meet one or more of those three conditions.
He said the Depository Trust and Clearing Corporation estimates that just 4 percent of public equities have settlement failures exceeding 0.5 percent of their outstanding shares.
“The SEC definition of ‘threshold’ securities, therefore, excludes 96 percent of all traded securities from strict locate requirements for short sales, or nearly 9,000 of the estimated 9,350 companies currently traded on U.S. exchanges and markets,” said Shapiro.
“Instead, he noted, Regulation SHO allows a broker dealer to satisfy the “locate” requirement for short sales in the securities of 96 percent of publicly-traded firms without either borrowing shares or entering into an agreement to do so, if (s)he has “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.”[2] The Regulation further states that this “reasonable grounds” standard will be satisfied if the equity being sold short is included in a current “Easy to Borrow” list.
Yet, said Shapiro, Regulation SHO sets no standards for these “Easy to Borrow” lists, other than that repeated failures to deliver securities included on a list will indicate that reliance on that particular list does not satisfy the “reasonable grounds” test.
“This provision allows a broker dealer to carry out a series of short sales without any direct evidence that the particular security being sold short is even available for borrowing. At a minimum, the SEC should establish clear and strict standards for inclusion on ‘Easy to Borrow’ lists based not on a list’s past record of including other securities that were not ultimately delivered, but on current evidence of the actual availability for borrowing of the number of shares of the particular security to be sold short.”
Similarly, said Shapiro, the final Regulation imposes strict delivery requirements once an extended failure to deliver has occurred only on short sales in “threshold” securities: When the short seller of a “threshold” security has failed to deliver the securities for 10 days after the normal settlement date, or 13 consecutive settlement days, Regulation SHO requires the clearing agency to step in and itself purchase the securities for delivery.
“But the Regulation provides virtually no means of enforcing the delivery of non-threshold shares sold short again, covering the securities of an estimated 96 percent of all publicly-traded companies, or nearly 9,000 from a total of 9,350 companies. Stated another way, Regulation SHO imposes no enforcement requirements on those who sell short and fail to deliver the shares, so long as the uncovered short sales of the targeted company equal less than 0.5
percent of its outstanding shares.
“Nor will this ‘threshold’ test of 0.5 percent of a company’s outstanding shares protect honest investors from those who seek to manipulate a company’s share price through large-scale naked short sales. Among the young public companies that are often the target of naked short sellers, most outstanding shares are held by company executives and original investors and restricted from trading trade freely. In all such cases, short sales equivalent to less than 0.5 percent of the company’s outstanding shares can amount to as much as 20 to 30 percent of the shares actually available for actual trading, allowing stock manipulators to drive down the share price with naked shorts that still do not breach the 0.5 percent ceiling set by Regulation SHO. If the 0.5 percent standard for threshold securities is retained, the Commission at a bare minimum should apply it to registered shares available for free trading, not to outstanding shares.
“These and other provisions of the final Regulation SHO are far weaker than even the draft version. The final Regulation has dropped a provision from the earlier draft that would have directed clearing agencies to report to the National Association of Security Dealers and the designated examining authority any investor failing to deliver.”
More important, stated Shapiro, the final Regulation eliminated a promising proposal in the draft version that would have withheld the benefits of mark-to-market payments (e.g., return of collateral as the share price declines) from investors who fail to deliver the shares they have sold short. Without this means of enforcing the delivery of shares sold short, those who fraudulently carry out naked short sales to manipulate the price of a company’s shares can continue to collect their profits, to the detriment of millions of honest investors.
“Regulating short sales in a way that still provides those who don’t deliver the shares they sell short with the profits from their uncompleted short sales violates the most basic principles of a fair and free market. Moreover, no outside authority will be alerted, so long as they target their fraud to any of the nearly estimated 9,000 companies whose equities are classified as ‘non-threshold’ securities, and limit the fraud in any single case to 0.5 percent of the company’s outstanding shares.”
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was “unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
Shapiro stated that by exempting from strict locate and delivery requirements any failures to deliver in equity issues with existing failures of less than 0.5 percent of their outstanding shares, Regulation SHO appears to establish an official level of acceptance and tolerance for unsettled or naked short sales.
“I respectfully submit that that these provisions could end up providing tacit SEC approval for billions of dollars in unsettled short sales. With the value of the publicly-traded shares on all exchanges and markets totaling an estimated $20.415 trillion, do these provisions effectively permit unsettled short sales of 0.5 percent of that total or an estimated $102 billion a day? I respectfully request that the SEC provide an estimate of the maximum unsettled short sales that could occur under Regulation SHO without triggering locate and delivery requirements.
“By permitting the widespread settlement failures that rightfully concern the NASAA and all honest investors, Regulation SHO effectively tolerates abuses, principally through naked short sales, that can undermine basic confidence in U.S. equity markets. Under the terms of this Regulation, naked short sellers will be able, in effect, to inject into the markets millions of shares that do not exist without triggering strict locate or delivery requirements. Whatever the legal definition, naked short sales are an economic equivalent of counterfeiting. Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.”
Shapiro urged the SEC to “reconsider the provisions of Regulations SHO and, at a minimum, apply the ‘locate and delivery’ requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.”
While the battle is still waged in the U.S., some of the threats to small investors’ investments are being exacted overseas. Despite some 250 companies winning their exit pass, the FaulkingTruth.com website reported that dozens of companies are still being refused delistings from the Berlin-Bremin Exchange, including ImageWare Systems (AMEX: IW) and Action Products International (NASDAQ: APII). FinancialWire also reported that Sontra Medical Corp. (NASDAQ: SONT) is among those whose shares Berlin has resisted delisting.
In all, Faulk said Berliner Freiverkehr CEO Holger Timm reported he has been asked by 386 firms to cease their trading. He is said to have balked at the term delisting, noting that “Trading foreign shares on the third-tier market segment at the Berlin or any other German exchange is not being regarded as a 'listing', therefore it is incorrect to use the term 'delisting' if a company wants to cease trading."
FaulkingTruth said others refused delistings include Endevco Inc. (OTCBB: ENDE), Limelight Media Group (OTCBB: LMMG), IpVoice Communications (OTCBB: IPVO), now NewMarket Technology Inc, (OTCBB: NMKT), Force Protection (OTCBB: FRCP), Cyber Digital Inc. (OTCBB: CYBD), and XRAYMEDIA (OTCBB:XRYM). Others mentioned yesterday included Military Communications Technology (OTCBB: MLTA), Dalrada Financial Corp. (OTCBB: DRDF), and Mannatech Inc. (NASDAQ: MTEX).
Timm sent a letter to companies asking to be delisted, which promised if “after considering the above aspects, should you still prefer your stocks not to be traded in Germany we will respect your wish and apply for delisting on the Berlin stock exchange.”
However, for dozens of companies, that appears to have been an empty offer.
Timm responded to Faulk that “the current situation regarding the eight companies questioned by you is as follows: ImageWare is listed on the AMEX and has been trading in Berlin since May, 3rd, 2000. Action Products is listed on NASDAQ and has been trading in Berlin since August, 10th, 1999. Endevco has been trading in Berlin since October, 22nd, 1999 with relevant retail trading volume (e.g. 1,855,440 shares traded in 2004). New Market Technologies has been trading with small volumes in Berlin since November, 24th, 2003. Force Protection and Xraymedia have commenced trading in February and March of this year. Because of the trading activities (trading in Force Protection totalled 40,000 shares and Xraymedia totalled 150,000 this year) the exchange refused the cessation of trading in these stocks.”
Officials of the Berlin exchange, however, were not as clear about the trading activities or lack of them.
As to its meetings with U.S. regulators from the U.S. Securities and Exchange Commission and the NASD, Timm reportedly stated: "We met the officials once on June 4th, but were not further involved in any talks or meetings. I know that the German exchanges and the German surveillance authorities continue with their talks but I am unaware of the status quo. Particularly, I am unaware of any efforts being made in the US to stop obvious short selling practices. I have got the impression from numerous conversations, that in the meantime many companies understand that Germany is not a place for short selling practices against US companies."
In a comment letter to the U.S. Securities and Exchange Commission, Larry Thompson, Managing Director and Senior Deputy General Counsel for the DTCC, said it is a violation of Section 17A of the Securities Act of 1934 to impose any process or restriction that would cause delays in the settlement process, said the online newsletter, published by http://www.investigatethesec.com.
“Although not the intent of the comment letter, Mr. Thomson has just become part of a growing number of people who contend that the most recent short selling reform package out of the SEC, Regulation SHO, may not be in compliance with federal law.
“The letter submitted to the SEC on August 16, 2004 was addressing the SEC’s proposal to restrict all transfer agents from clearing trades on those issuers who created a ‘Custody Only”’ restriction on the trading of their securities,” noted the newsletter.
“Many companies have, in the past sought out this ‘self-help’ measure to reduce the abuses of naked short selling. Without regulatory support in the fraud this was the only possible means of protection available to these issuers. Thomson, whose agency would stand to lose business by this ‘Custody Only’ style of trading, was agreeing with the SEC’s proposal when he ventured into the legal aspects of the issuers proposed restrictions.
“His legal points, presumably unintended, actually shot squarely across the bow of the SEC’s Regulation SHO,” said StockGate Today, pointing to http://www.sec.gov/rules/proposed/s72404/s72404-14.pdf
“The Proposed Rule furthers the goals articulated by Congress when it adopted Section 17A of the Exchange Act in that the Proposed Rule will, among other things, promote the prompt and accurate clearance and settlement of securities transactions and eliminate the delay, inefficiencies and unnecessary costs inherent in "certificate only "trading sought to be imposed by certain issuers.
Actually, said the publication, the statute referenced, Section 17A of the Securities Act repeatedly states: “The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.”
“Thompson concludes his opinion letter to the SEC by surmising that the SEC should proceed on with this proposal as written because issuers are not authorized to put restrictions on their stock. For transfer agents to clear these stocks would be aiding and abetting unlawful conduct. The point of law being the settlement requirements defined in Section 17A of the Securities Act of 1934.
“Thus, asked the newsletter, with Thompson “claiming that a delay in the settlement of trades is unlawful how can Regulation SHO be grounded by the presumption that trade settlements are not a mandatory part of the Markets?
“The SEC, in Regulation SHO claims that 4% of all publicly traded companies have levels of settlement failures that exceed an abusive threshold. They also admit that in some cases the failures exceed the entire public float of companies. These are market conditions not only create delays and inefficiencies but fraud and manipulation as well. The SEC’s final package never addressed forced settlements and forced timelines on the failures but instead simply threatened ‘future enforcement’ possibilities and placed “restrictions’ above abusive levels.
“The NASD tried to impose a 10 day mandatory window for settlement on fails and the SEC shot down their proposal.
“If the SEC claims the failures under the present DTCC/NSCC settlement system results in 4% of our companies failing above an abusive level, and agrees that delays in settlement are against the law, where is the enforcement of the Securities Act today?” asks the newsletter.
Rumors have been rampant for weeks that the SEC and NASD are at odds over the NASD’s proposals for stronger regulations to squelch illegal market manipulation, proposals that apparently have fallen on deaf ears at the SEC. The frustration boiled over recently when NASD officials responded to inquiries from Dave Patch, editor of Stockgate Today, by venting against criticisms they themselves were being too soft on fraudsters, money launderers and offshore hedge funds who lurk among the illegal naked short sellers.
Patch editorialized that the individual interviewed by the PIPES Report should be terminated.
“By my interpretation, this SEC spokesman has just admitted that they are willing to allow the abuse to take place and only initiate penalties after settlement failures have reached abusive levels. While the SEC does place this restriction of ‘pre-borrowing’ for future short sales, it only becomes a restriction once the failures in settlement reach above a certain abusive threshold.,” said Stockgate Today.
“The SEC never then forces the trades that failed settlement above this level to be immediately settled either. So where is the pain?
What prevents the criminals from attempting the crime? “The NASD’s proposal, unlike the SEC’s, would eliminate any and all opportunity to reach that abusive threshold in the first place as they focus on forcing trades to settle promptly as mandated in Section 17A of the Securities Act.”
Patch said the NASD proposal, now in jeopardy at the SEC, “forces the market to act responsibly.”
Stockgate Today noted that the SEC, in going forward with Regulation SHO, has ignored the NASD, North American Association of Securities Administrators, investors and issuers.
The final Regulation SHO rules are at http://www.sec.gov/rules/final/34-50103.htm. The trade reporting requirements are at http://www.nasdr.com/2610_2004.asp#04-54.
Recently it was reported that regulated companies, such as dealers, brokers, mutual fund companies, financing firms, and investment houses, have been told they have to submit revised operating manuals to incorporate changes in the Anti-Money-Laundering Act of 2001 by Oct. 29.
The key is a requirement that regulated firms “must know their customers” to prevent money-laundering practices. The firms have to have a procedure to get satisfactory proof of the customer's identity and ensure that effective procedures for verifying the identity of new customers are in place.
Although prospective clients should be interviewed personally, procedures for verification of accounts without face-to-face contact include independent verification of the home or business numbers for telephone interviews, and possible confirmation of employment.
Those outside the country must submit passports, birth certificates, driver’s licenses, employment identification cards or incorporation and partnership papers for corporate accounts, authenticated by a consulate.
However, FinancialWire interviews with spokespersons at the SEC has determined that individuals may open nominee offshore firms without providing their identities to anyone, and by using a multiple number of such nominee firms can even gain complete control of a public company while never revealing their true identities.
The SEC told FinancialWire that it has no power to require identification of individuals behind such firms.
Columnist Jack Anderson has stated that millions if not billions of dollars are laundered through naked short selling schemes.
Meanwhile, opponents of the illegal schemes await the SEC’s acknowledgement of a public NASD proposal that mandates guaranteed settlement of trades after a specifically defined time limit of failure. The SEC and the NASD had apparently hoped the issue would just die, as the proposal is much tougher than the watered-down Regulation SHO that is now on the way to becoming law and implemented in January, 2005.
In an email seen exclusively by FinancialWire, Marc Menchel, Executive Vice President and General Counsel of NASD’s Regulatory Policy and Oversight’s Office of General Counsel, told Patch that “it is not unusual for the SEC and NASD to propose courses of actions that differ in scope and practice as has happened here. The SEC, after thorough deliberation from our point of view, has spoken to this matter in the adoption of Reg SHO. At this juncture, we are considering whether further amendments are warranted to our proposal.”
Menchel said that indeed “NASD and SEC have been in conversations on this topic and both have pursued courses of rulemaking to address the topic.”
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its “stock borrow” program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice.”
All this has led to some major changes on Wall Street, if not regulatory attentiveness.
Charles Schwab & Co. recently said it is exiting the market-making business. It is one of several market makers that have been the subject of accusations and/or legal entanglements over naked shorting allegations and issues.
The company had said it is either the number one or number two market-maker in more than half of all of NASDAQ’s (OTCBB: NDAQ) listed stocks.
Recently observers were surprised to find a comment letter submitted to the SEC by Mike Alexander, Senior VP of Charles Schwab, that admits outright that brokerages regularly ignore rules and regulations, saying it is not rules that need to be written; it is changes in behavior that is needed.
The comments were directed towards proposed changes in the U.S. settlement system, but could easily apply to other regulations as well.
“Improvements in the U.S. settlement system will only be truly achieved if and when regulations are rationalized to ensure that all market participants are held accountable for compliance. For example, the industry has struggled with the issue of institutional trade affirmation for quite some time now. While the benefits to the clearance and settlement system are self-evident, Buy-Side firms and Custodian banks have been resistant to make those changes that provide for same-day trade confirmation / affirmation and assurance of trade settlement,” said Alexander.
“Schwab opposes the notion that securities intermediaries such as broker-dealers be required to police compliance,” he stated. “The NYSE and other SROs have had trade affirmation rules on their books for some time. However, such rules have not been effective in changing the behavior of Buy-Side firms or their custodians; nor do the rules provide assurance that the affirmed trade will settle.
“Recognition of this fact is evidence that changes to the settlement cycle not only require overhauling systems, but also changing behavior. We believe that only by holding all market participants directly accountable for making required affirmations will the necessary changes to behavior,” he stated at http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf .
In a June 23 release, the SEC stated it has put into place Rule 202(T), which establishes procedures to allow the Commission to temporarily suspend the operation of the current "tick" test in Rule 10a-1, and any short sale price test of any exchange or national securities association, for specified securities.
Through a separate order, the Commission will suspend, on a pilot basis for a period of one-year, the tick test provision of paragraph (a) of Rule 10a-1, and any short sale price test of any exchange or national securities association, for approximately one-third of stocks in the Russell 3000 index.
The order also will suspend, on a pilot basis for a period of one year, the tick test provision of paragraph (a) of Rule 10a-1 for short sales executed in any security included in the Russell 1000 index after 4:15 p.m. Eastern, and all other securities after the close of the consolidated tape, and until the open of the consolidated tape the next day.
The pilot will commence on January 3, 2005 to permit broker-dealers and self-regulatory organizations to make the necessary programming adjustments.
The Commission deferred consideration of the proposal to replace the current "tick" test of Rule 10a-1 with a new uniform bid test. The Commission could reconsider any further action on these proposals after the completion of the pilot.
Rule 203, which will incorporate current Rule 10a-2 and will create a uniform Commission rule requiring broker-dealers, prior to effecting short sales in all equity securities, to "locate" securities available for borrowing.
There will be limited exceptions from the locate requirement, including for short sales by registered market makers in connection with bona-fide market making.
Rule 203 also imposes additional requirements on designated "threshold securities." Rule 203 defines a threshold security to mean an equity security for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and that is equal to at least 0.5% of the issue's total shares outstanding.
Where a clearing agency participant has a fail to deliver position in threshold securities that persists for ten consecutive days after settlement, the participant must take action to close out the position. Until the position is closed out, the participant, and any broker-dealer for which it clears transactions, may not effect further short sales in the particular threshold security without borrowing or entering into a bona fide arrangement to borrow the security.
Rule 203 will become effective 30 days after publication with a compliance date of January 3, 2005, to permit firms to make programming and procedural adjustments.
Rule 200, which among other things, will redesignate current Rule 3b-3 with some modifications to define ownership and aggregation of securities positions, and include a requirement to mark all sell orders in all equity securities. Rule 200 will become effective 30 days after publication.
The Commission also adopted amendments to Rule 105 of Regulation M to remove the current shelf offering exception, and issued interpretive guidance addressing sham transactions designed to evade the rule.
The amendment applies to short sales effected within five days prior to the pricing of a shelf offering. Such short sales may not be covered with offering securities purchased from an underwriter or other broker-dealer participating in the offering.
The Rule 105 amendments will be effective 30 days after publication in the Federal Register, and the interpretive guidance will be effective upon such publication.
Opponents of naked short selling were, however, quick to denounce the provision that allows market makers an exemption, and many market observers said that the SEC should provide a public list of companies that fall into the “threshold security” category.
“The SEC claims that the number of companies involved in this ‘threshold security’ category is 4% of all publicly traded companies. If in fact it is that small the process is certainly manageable,” said the website InvestigatetheSEC.com at http://www.investigatethesec.com . “It is also the right of every issuer, in protecting their business and their investors to know the status of their stock trading.”
Some were discussing whether the SEC can keep such information private under the Freedom of Information Act.
The marketplace is already upset over promises by the Berlin Stock Exchange, since broken, that it would delist any company upon request.
“Please understand that cessation of trading in the shares of XRAYMEDIA Inc. (OTCBB: XRYM) is not possible,” the exchange told one such requester.
It’s not just U.S. companies such as Whistler Investments (OTCBB: WHIS), Sonoran Energy (OTCBB: SNRN), Celsion Corporation (AMEX: CLN), and eLinear Inc. (AMEX: ELU) or Israeli companies that have had serious concerns about their unannounced and unathrorized listings on the Berlin-Bremen Stock Exchange.
Apparently, some 150 British companies are protesting the same fate.
A number of UK-listed companies have demanded a London Stock Exchange investigation after they found that their shares are being traded.
Meanwhile, Whistler, Sonoran and eLinear have announced they have successfully secured their delistings, and the U.S. Securities and Exchange Commission has rescheduled its open hearing to consider the adoption of amendments to Regulation Sho to October 4 at 9:30 a.m. The announcement is at http://www.sec.gov/news/digest/dig061504.txt .
According to the London Money Telegraph, “several companies believe the market for their shares has been distorted and that they have fallen in value after trading started on the Berlin-Bremen exchange.
“Some smaller companies, whose shares are lightly traded in London, fear the Berlin market has been used by speculators to short-sell their shares.”
The Telegraph said the number of companies are thought to be as high as 150, including even “larger companies” such as Matalan (OTC: MATNF) and Halfords.
Mladen Ninkov, the chairman of Aim-listed Griffin Mining (OTC: GFNMF), was quoted as saying: "We were put on the Berlin market without our knowledge by a German broker and now we've got about 8m shares out in a short sale. It is horrifying - that is about 4 per cent of the company and it is forcing the price down."
A spokesman for the London Stock Exchange said: "If there is evidence of market abuse we would refer that on to the appropriate authorities."
Whistler said that according to its transfer agent records, “we have 5,504,680 shares held by DTC, but the ADP broker search indicates of 6,217,458 shares being reported by broker/dealers as being held on behalf of their customers, indicating a short position of more than 700,000 shares. A summary report can be viewed at http://www.whistlerinvestments.com/shorts.html .
“We have therefore commenced work with DTC for a formal review of the reported excessive broker/dealer holdings of our stock so that we can conduct our corporate affairs properly in view of our planned stockholders meeting and other upcoming corporate matters. We again advise our stockholders make sure that they receive delivery of any shares that they purchase, and also that their stock is not being borrowed without authorization.
Holly Roseberry, President of Whistler Investments, states "We intend to get to the bottom of the excessive short position and bring stability back into the trading of our stock. We're happy to say that we have 5,133 stockholders and we expect all our stockholders to benefit from the shorters having to cover their short positions.”
FinancialWire has reported on the disclosure that “Dateline,” the investigatory TV program aired by General Electric’s (NYSE: GE) NBC unit, has purportedly been preparing a blockbuster expose of “Stockgate” (see separate story at http://www.financialwire.net).
It is not known if “Dateline” has uncovered continuing underworld connections to the scandal, but FinancialWire reported that Dateline may be pointing a large finger of conflict at the U.S. Securities and Exchange Commission itself, which reportedly receives a slice of every transaction fee as part of its budget. According to court filings supported by the O’Quinn/Christian legal network, almost $1 billion annually is received by the Depository Trust and Clearing Corp. for its “Stock Borrow Program,” which the lawsuits claim is just a fancy name for counterfeiting, as the DTCC purportedly lends out many multiples of the actual certificates in the float. Apparently the SEC receives a transaction fee for each transaction facilitated by these loans of non-existent certificates, which could knock a hole in its budget should the revenues from the practice be halted.
The North American Securities Administrators Association, comprised of state and Canadian regulators, has pointedly told the SEC that either it must rethink its cozy DTCC relationship, or it hints, some of its more aggressive state practitioners (think Eliot Spitzer) may do the rethinking for the SEC.
Naked short selling is worrisome for hundreds of small U.S. companies, including those recently asking to be delisted from the Berlin Stock Exchange, such as Golden Phoenix Minerals, Inc. (OTCBB: GPXM), Nannaco, Inc. (OTCBB: NNCO), 5G Wireless Communications, Inc. (OTCBB: FGWC), CyberAds, Inc. (OTCBB :CYAD), Provectus Pharmaceuticals, Inc. (OTCBB: PVCT), House of Brussels Chocolates (OTCBB: HBSL), InforMedix, Inc. (OTCBB: IFMX), Tissera, Inc. (OTCBB: TSSR), Americana Publishing, Inc. (OTCBB: APBH), Celsion Corporation (AMEX: CLN), ChampionLyte Holdings, Inc. (OTCBB: CPLY), Pickups Plus, Inc. (OTCBB:PUPS), China Wireless Communications Inc. (OTC BB: CWLC), CareDecision Corp. (OTCBB: CDED), Titan General Holdings, Inc. (OTCBB: TTGH), IPVoice Communications, Inc. (OTCBB: IPVO), Whistler Investments (OTCBB: WHIS), WARP Technology Holdings, Inc. (OTCBB: WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (OTCBB: ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (TSX: NHC; OTCBB: NHCMF), Stratus Services Group, Inc. (OTCBB: SERV), Golden Phoenix Minerals, Inc. (OTCBB: GPXM).
Berliner Freiverkehr (Aktien) AG has been singled out as the broker and market maker that has been “listing” the companies. It is suspected that one broker, RA Angsar Limprecht, is involved in all if not most of the listings.
Small public companies are squeezed not only by hedge funds, naked short sellers, overseas listers such as the Berlin Stock Exchange, and the out-of-control “Stock Borrow Program” run by the governance-conflict-laden Depository Trust and Clearing Corporation, but to the amazement of the industry, as often and not by their own regulators.
A new staff recommendation by Annette Nazareth, director of the division of market regulation at the U.S. Securities and Exchange Commission to “outlaw” ownership of paper certificates at the same time the Depository Trust and Clearing Corporation is under intense scrutiny for alleged electronic counterfeiting has begun hitting the small public company markets, company executives, shareholders and manipulative short-selling opponents like the proverbial ton of bricks.
A Dow Jones (NYSE: DJ) article by Judith Burns sparked the uproar, as the inextricably intertwined web of connections between the SEC and the DTC, which is sagging from the weight of conflicted governance by representatives from a rollcall of industry heavyweights, including NASD, which owns NASDAQ (OTCBB: NDAQ), the New York Stock Exchange, Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH), to name only a few.
The rule proposal would bar stock transfer agents from handling shares that carry any limitations on transfer. Control over stock certificates is one of the ways that small companies have combated illegal naked short sellers. Burns quoted Nazareth as saying that these companies’ “self-help” efforts “aren’t helping U.S. markets overall.” Nazareth was quoted as saying restrictions on stocks are “a significant step backwards” in the “move from paper stock certificates to automated computerized trading.”
Nazareth said that abusive “naked” short selling has been a problem “in some cases,” but that is “best dealt with by a pending SEC proposal,” presumably Regulation SHO.
SEC Commissioner William Donaldson purportedly publicly refused to answer any questions from the NASD about the timing of the Commission’s consideration of the Regulation at a conference where he was simultaneously proposing early reforms of the mutual fund scandals. The Dow Jones said, however, that Robert Colby, SEC deputy market regulation division director, predicted the SEC will take that to a vote in early June.
The Dow Jones report noted that “naked short-selling occurs when sellers don't buy shares to replace those they borrowed, a manipulative practice that can drive a company's stock price sharply lower.
The stock certiticate plan has been put to a 30-day comment periodl Then the SEC would have to vote to adopt it. If adopted, Colby was quoted as saying that regulators might “sue firms that seek to impose restrictions on stock transfers.”
The recent lawsuit filed by Nanopierce Technologies (OTCBB: NPCT) alleges that the Depository Trust and Clearing Corp. has a lot of reasons, almost one billion of them a year, to keep illegal naked short selling in operation. It was the shot across the bow by the legendary Houston law firms of Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, all brought to their knees.
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. “Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors,” and have resulted in over 7,000 public companies having been “shorted out of existence over the past six years.” Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the “sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy.”
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O’Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
Recently the NASD and U.S. Securities and Exchange Commission approved an interim naked short-selling band-aid, requiring U.S. brokers to make an “affirmative determination” that short-sellers, even foreign short-sellers, mostly Canadian, can find certificates to cover before processing the order.
Last year, many besieged public companies sought refuge from the manipulation by seeking to exit the DTC, but on October 4, 2003, the SEC stated “the issues surrounding naked short selling are not germane to the manner in which DTC operates as a depository registered as a clearing agency. Decisions to engage in such transactions are made by parties other than DTC. DTC does not allow its participants to establish short positions resulting from their failure to deliver securities at settlement. While the Commission appreciates commenters' concerns about manipulative activity, those concerns must be addressed by other means.”
The Nanopierce lawsuit, said to be the first of many out of the box, emphatically suggests otherwise. According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the “Stock Borrow Program.”
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. “There are numerous cases of a single share being lent ten or many more times,” giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
“Such re-hypothecation has in effect made the potential ‘float’ in a single company's shares virtually unlimited and the term ‘float’ meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence.” Burrell said the Christian/O’Quinn lawsuits will seek to show that the “counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the ‘Sale of Unregistered Securities’.”
While the Nanopierce lawsuit has been filed at the state level, another companion lawsuit just heading to the courts on behalf of Exotics.com (OTC: EXII) will be argued at the Federal level.
Nanopierce’s suit in the 2nd Judicial District Court in Nevada, is Case No. CV04-01079, alleges that the DTC’s “stock borrow program” was “purportedly created to address SHORT TERM delivery failures,” but that the “end result of the program has been to create tens of millions of unissued and unregistered shares to be traded in the public market,” and in some instances resulting in “two or more shareholders who purchase shares in separate transactions to own the same shares.”
The complaint alleges that the DTC has a colossal disincentive to stop the “stock borrow” program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that “open positions” resulting from this activity at the close of business on December 31, 2003, “approximated $3,025,467,000” due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC’s “Stock Borrow Program.”
Nanopierce claims that DTCC and NSCC have joined in a “scheme” to “manipulate downward the price of the affected securities, thereby reducing the market value of the open fail to deliver positions.” The suit also claims that the s have permitted sellers to maintain open fail to deliver positions of tens of millions of shares for periods of a year and even longer.
It quotes the National Association of Security Dealers as admitting that “concerns have been raised by members, issuers, investors and other interested parties about potentially abusive short selling activities occurring in the marketplace. In particular, naked short selling, or selling short without borrowing securities to make delivery, can result in long term failures to deliver, including aggregate failures to deliver that exceed the total float of a security. NASD believes such extended failures to deliver can have a negative effect on the market. Among other things, by not having to deliver securities, naked short sellers can take on larger short positions than would otherwise be permissible, which can facilitate manipulative activity.”
Nanopierce claims that it had “relied on material misrepresentations and omissions by DTC and NSCC in trading its shares in the stock market “without knowledge of s’ fraud-on-the market through statements they made about the clearing and settlement services they provided.” Further, it claims that the s acted with “scienter” since they had a major financial financial motivation to falsely represent their services, which Nanopierce claims are also anticompetitive.
The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC’s October 4 ruling indicates, its monopoly over the electronic trading system appears even to be protected.
The Depository Trust and Clearing Corp.’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
As the Nanopierce lawsuit reveals, those were indeed strong words, meddling as it did, in a substantial revenues base for the DTCC.
Recently, leading market makers and brokers named in various lawsuits and other actions, including FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group, Bank of America's (NYSE: BAC) Banc of America Securities LLC, Societe Generale's (OTC: SCGLF) SG Cowen Securities Corp. vFinance, Inc. (OTCBB: VFIN), Knight Trading Group, Inc. (NASDAQ: NITE), A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), and ETrade Group, Inc. (NYSE: ET), were forced to comply with new short-selling market regulations imposed by the NASD after the SEC had “sat on” the NASD request to plug material loopholes for almost 2-1/2 years.
“The new rules expand the scope of the affirmative determination requirements to include orders received from broker/dealers that are not members of NASD ("non-member broker/dealers").
The new rule is on the web at http://www.nasdr.com/2610_2004.asp#04-03
The rule itself, while welcomed by small companies and their shareholders in the U.S., nevertheless raised an outcry because the NASD’s request to put it into effect had set on a shelf at the SEC since 2001.
The scandal has embroiled hundreds of companies and dozens of brokers and marketmakers, in a web of internaitional intrigue, manipulative short-selling and cross-border acctions and denials.
Comments on Regulation SHO ended January 5, and may be viewed at http://www.sec.gov/rules/proposed/s72303.shtml .
Some 122 companies, including 13 brokers, such as FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group and vFinance, Inc. (OTCBB: VFIN). A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), Knight (NASDAQ: NITE) and ETrade Group, Inc. (NYSE: ET), have been embroiled for over a year in a raging controversy
The remaining 109 companies among the 122 named to date have issued press releases or been named in the media as having been victimized, or as taking various actions, either alone or in concert with other companies, to oppose manipulative trading in the form of illegal naked short selling. The actions have ranged from lawsuits to withdrawals and threatened withdrawals from the electronic trading system managed by the Depository Trust & Clearing Corp., to withdrawals from toxic financings, to the issuance of dividends or name changes designed to squeeze manipulators, to joining associations or networks or to contacting regulatory authorities to provide documentation of abuses or otherwise complain.
The complete list of those 108 companies include Advanced Viral Research Corp. (OTCBB: ADVR), AdZone Research, Inc. (OTCBB: ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (OTCBB: AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (OTC: ATSC), Federal Agricultural Mortgage / Farmer Mac (NYSE: AGM) Allied Capital (NYSE: ALD), American Motorcycle (OTC: AMCYV), American International Industries (OTCBB: AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (OTC: ATSC) Bluebook International (OTCBB: BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (OTCBB: BIFT), Biocurex (OTCBB: BOCX). Broadleaf Capital Partners, Inc. (OTCBB: BDLF), Chattem, Inc. (NASDAQ: CHTT), Critical Home Care (OTCBB: CCLH), Composite Holdings (OTC: COHIA), CyberDigital, Inc. (OTCBB: CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (NASDAQ: DCEL), Eagle Tech Communications (OTC: EATC), Edgetech Services (OTCBB: EDGH);
Also, Endovasc Ltd. (OTCBB: EVSC), Enviro-Energy Corporation (OTCBB: ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (OTCBB: ESWW), EPIXTAR Corp. (OTCBB: EPXR), eResearchTechnologies, Inc. (NASDAQ: ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (NYSE: FRE), FreeStar Technologies (OTCBB: FSRCE), Front Porch Digital,
Inc. (OTCBB: FPDI), Geotec Thermal Generators, Inc. (OTCBB: GETC), Genesis Intermedia (OTC: GENI), GeneMax Corp. (OTCBB: GMXX), Global Explorations Inc (OTC: GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (OTC: HPON), H-Quotient, Inc., (OTCBB: HQNT), Hyperdynamics Corp. (OTCBB: HYPD), International Biochem (OTCBB: IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (OTCBB: IBCS), InternetStudios, Inc. (OTCBB: ISTO), ITIS Holdings (OTCBB: ITHH), Investco Corp. (OTCBB: IVCO), Lair Holdings (OTC: LAIR), Lifeline BioTechnologies Inc. (OTC: LBTT), Life Energy & Technology (OTCBB: LETH), MBIA (NYSE: MBI);
Also, MegaMania Interactive (OTC: MNIA), MetaSource Group, Inc. (OTCBB: MTSR),Midastrade.com (OTC: MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (OTC: MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (OTCBB: NPCT), Nutra Pharmaceutical (OTCBB: NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (OTC: NVGV), Orbit E-Commerce, Inc. (OTCBB: OECI), Pitts & Spitts (OTC: PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (OTC: PYST),Petrogen Corp. (OTCBB: PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (OTCBB: PDVN), PrimeHoldings.com, Inc. (OTC: PRIM), Phlo Corporation (OTCBB: PHLC), Resourcing Solutions (OTC: RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (NASDAQ: SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (OTCBB: SDNA);
Also, Sionix Corp. (OTCBB: SINX), Sonoran Energy (OTCBB: SNRN), Starmax Technologies (OTC: SMXIF), Storage Suites America (OTC: SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (NASDAQ: SPRI), Technology Logistics (OTC: TLOS), Swiss Medica, Inc. (OTCBB: SWME), Ten Stix, Inc. (OTCBB: TNTI), Tidelands Oil (OTCBB: TIDE), Titan Construction (OTC: TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (OTCBB: USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (AMEX: VRA), Viragen International (OTCBB: VGNI), Vista Continental Corporation, (OTCBB: VICC), Viva International (OTCBB: VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (OTCBB: WIZD), WorldTradeShow.com (OTC: WTSW) and Y3K Secure Enterprise Software, Inc. (OTCBB: YTHK).
Earlier in 2003, the SEC fined Rhino Advisors, Inc., $1 million for its representation of Amro International in the financing and manipulation of Sedona Corp. Amro, also known as AMRO, was registered in Panama, a secretive offshore haven, but was not named in the SEC settlement. Another 60 public companies may have been manipulated by the fined Rhino Advisors and its indicted principals, or its funding apparatus, Amro.
These include:
All American Food Group Inc (OTC: AAFGQ), Amanda Co Inc (OTC: AMNA), Antra Holdings (OTC: RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AMEX: AVN), Bionutrics Inc (OTC: BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (NASDAQ: BUTL),Calypte Biomedical Corp (OTCBB: CYPT), Chemtrak Inc/DE (OTC: CMTR), Clicknsettle Com Inc (OTCBB: CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (OTC: CLWB), Dental Medical Diagnostic Systems Inc (OTC: DMDS), Detour Media Group Inc (OTC: DTRM),
Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (OTC: DISS), International Inc (OTC: DYNX), Endovasc Ltd Inc (OTCBB: EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (OTC: FRBW), Greystone Digital Technology Inc (OTC: GSTN), Havana Republic Inc/FL (OTCBB: HVNR), Henley Healthcare Inc (OTC: HENL), Hollywood Media Corp (NASDAQ: HOLL), Ibiz Technology Corp (OTCBB: IBZT), Diagnostic Systems Inc/FL (OTCBB: IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (OTCBB: RDOC),
Also, Interferon Sciences Inc (OTC: IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (OTC: THMZ), Medisys Technologies Inc (OTC: SCEP), Milestone Scientific Inc/NJ (AMEX: MS), Nevada Manhattan Group Inc (OTC: NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OTC: OSYM), Pacific Systems Control Technology Inc (OTCBB: PFSY), Professional Transportation Group Ltd Inc (OTC: TRUC), Rnethealth Inc (OTC: RNTT),
Also, Sand Technology Inc (NASDAQ: SNDT), Sedona Corp (OTCBB: SDNA), Silverado Foods Inc (OTC: SVFO), Stockgroup Information Systems (OTCBB: SWEB) Surgilight Inc (OTC: SRGL), Tasty Fries Inc (OTCBB: TFRY), Tech Laboratories Inc (OTCBB: TCHL), Teltran International Group Ltd (OTC: TLTG), Titan Motorcycle Co of America Inc (OTC: TMOTQ), Trans Energy Inc (OTCBB: TSRG), Motorcycle Co (OTC: UMCC), Universal Communication Systems Inc (OTCBB: UCSY), Medical Systems Inc (OTC: UMSI), Vianet Technologies Inc (OTC: VNTK),Viragen Inc (AMEX: VRA), Webcatalyst Inc (OTC: WBCL), Worldwide Wireless Networks Inc (OTCBB: WWWNQ), and ZAP (OTCBB: ZAPZ).
For up-to-the-minute news, features and links click on http://www.financialwire.net
FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp
Listen to StreetSignals™ (Investrend "ON-THE-AIR") "live" Saturdays from 9 p.m. to 10 p.m. on stations coast-to-coast, or right now on the web at http://www.BusinessTalkRadio.net.
The FinancialWire NewsFeed is now available in multiple formats to your site or desktop, free. Click on: http://www.investrend.com/XmlFeeds?level=268
http://www.investrend.com/articles/article.asp?analystId=0&id=10837&topicId=160&level=16...
October 4, 2004. (FinancialWire) The illegal manipulative trading issue known as “naked short selling” that has embroiled almost the whole of Wall Street, including lawsuits against A.G. Edwards (NYSE: AGE), Citigroup’s (NYSE: C) Citibank, Charles Schwab (NYSE: SCH) and Ameritrade Holding Corp. (NASDAQ: AMTD), found some attention at the recent Securities and Exchange Commission’s Forum on Small Business.
Delegates to the September 20 annual forum passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
The campaign against illegal and manipulative naked short selling suffered a major blow recently as a U.S. District Judge dismissed Jag Media Holdings’ (OTC: JAGH) suit upon a motion by some 75 defendants, including A.G. Edwards (NYSE: AGE) and Citigroup’s (NYSE: C) Citibank.
It left leaders of the campaign disillusioned at the quality of legal work being performed by the vaunted law firms Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, and may have squelched purported plans by General Electric’s (NYSE: GE) Dateline NBC program to air an expose on the naked shorting controversy.
According to Dow Jones (NYSE: DJ) reporter Carol Remond who first broke the story, which still doesn’t seem to have been revealed to the company’s investors and shareholders via either a press announcement or SEC filing, Jag Media and Gary Valinoti, the company's former chief executive, sued over 100 brokerage firms, investment firms and financial institutions in July 2002, alleging that they entered into a civil conspiracy and concert of action to short sell Jag Media's stock.
“In the suit, originally filed in the Judicial District Court, Harris county in Texas and later removed to the U.S. District Court for the Southern District of Texas, Houston Division, Jag Media alleged that the financial institutions committed market manipulation and fraud and violated securities laws,” Remond reported, noting that U.S. District Judge Vanessa Gilmore dismissed the planitiffs’ allegations of securities fraud and illegal short selling because of filing deficiencies, specifically that they “failed to state a claim, failed to allege any wrongdoing by any specific defendants and failed to properly claim fraud.”
The attorneys, including famed lawyer John O’Quinn, apparently had plenty of notice and opportunity to get their acts together. Remond noted that in September, 2003, Judge Gilmore had found that Jag Media failed to establish that all or any of the defendants violated the securities exchange act. Gilmore said that Jag Media's second amended complaint lacked specifics and asked Jag Media to file an amended complaint.
“Jag Media filed its third amended complaint in October 2003. The company alleged in that complaint that its case involves an initial scheme by three of the defendants - Mark Valentine, Thompson, Kernaghan & Co. and CALP II Limited Partnership - to defraud Jag Media into selling convertible preferred stock at less than fair market value. According to Jag Media, this initial scheme was followed by a second scheme in which brokers and market makers manipulated the company's shares for their own profit. Jag Media claimed that the financial firms used various trading tactics such as matched trades, washed trades, ‘painting the tape’ and selling counterfeit, or non-existent shares.”
Stockgate Today, the newsletter of InvestigatetheSEC.com founder Dave Patch said for the “legal teams spearheaded by millionaire Texas lawyer John O’Quinn,” the latest result of those efforts “appears to be a repeat pattern.”
He pointed out that Judge Gilmore’s “scathing ruling” cited “repeated deficiencies in the attorneys’ abilities to file an amended complaint meeting the standards of law.”
He said that despite the article in the Dow Jones, the lawyers had claimed they had heard of no such ruling, leading to Patch to deliver the fatal blow: “The lawyers were the last to know.”
Patch said that the lawyers had “been given over a year, as well as the benefit of a 2003 Order to draft up a third and final filing that met the standards of laws and once again they failed. With that, the lawsuit, and the evidence at hand will not be used in a court of law to determine guilt or innocence. The victims in this case will remain victims for now.”
Patch called the setback an “embarrassment to all the people who fight against the abuses taking place against the lower tier companies and the middle class investors who put their investments in these companies.”
Stockgate, a growing global malady, is being contested on multiple levels, including judicial, legislative and political.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed “serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets.”
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, he said, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced.
“Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales,” Shapiro charged.
“As Regulation SHO now stands, strict requirements to locate and deliver borrowed shares in short sale transactions are directed only to a very small subset of securities, called ‘threshold’ securities, that 1) already have fails to deliver at a registered clearing agency of at least 10,000 shares for five consecutive settlement days, 2) when those failures equal at least one-half of one percent of the outstanding shares, and 3) the security is already included on a daily list of securities meeting these requirements published by an SRO.
“Only when all three of these conditions are met is a broker dealer carrying out a short sale required by Regulation SHO to borrow the security or enter into a bona fide arrangement to do so. These provisions set a new and troubling standard for short sales: A broker can now sell short a security without borrowing the shares or arranging to do so, so long as the security does not meet one or more of those three conditions.
He said the Depository Trust and Clearing Corporation estimates that just 4 percent of public equities have settlement failures exceeding 0.5 percent of their outstanding shares.
“The SEC definition of ‘threshold’ securities, therefore, excludes 96 percent of all traded securities from strict locate requirements for short sales, or nearly 9,000 of the estimated 9,350 companies currently traded on U.S. exchanges and markets,” said Shapiro.
“Instead, he noted, Regulation SHO allows a broker dealer to satisfy the “locate” requirement for short sales in the securities of 96 percent of publicly-traded firms without either borrowing shares or entering into an agreement to do so, if (s)he has “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.”[2] The Regulation further states that this “reasonable grounds” standard will be satisfied if the equity being sold short is included in a current “Easy to Borrow” list.
Yet, said Shapiro, Regulation SHO sets no standards for these “Easy to Borrow” lists, other than that repeated failures to deliver securities included on a list will indicate that reliance on that particular list does not satisfy the “reasonable grounds” test.
“This provision allows a broker dealer to carry out a series of short sales without any direct evidence that the particular security being sold short is even available for borrowing. At a minimum, the SEC should establish clear and strict standards for inclusion on ‘Easy to Borrow’ lists based not on a list’s past record of including other securities that were not ultimately delivered, but on current evidence of the actual availability for borrowing of the number of shares of the particular security to be sold short.”
Similarly, said Shapiro, the final Regulation imposes strict delivery requirements once an extended failure to deliver has occurred only on short sales in “threshold” securities: When the short seller of a “threshold” security has failed to deliver the securities for 10 days after the normal settlement date, or 13 consecutive settlement days, Regulation SHO requires the clearing agency to step in and itself purchase the securities for delivery.
“But the Regulation provides virtually no means of enforcing the delivery of non-threshold shares sold short again, covering the securities of an estimated 96 percent of all publicly-traded companies, or nearly 9,000 from a total of 9,350 companies. Stated another way, Regulation SHO imposes no enforcement requirements on those who sell short and fail to deliver the shares, so long as the uncovered short sales of the targeted company equal less than 0.5
percent of its outstanding shares.
“Nor will this ‘threshold’ test of 0.5 percent of a company’s outstanding shares protect honest investors from those who seek to manipulate a company’s share price through large-scale naked short sales. Among the young public companies that are often the target of naked short sellers, most outstanding shares are held by company executives and original investors and restricted from trading trade freely. In all such cases, short sales equivalent to less than 0.5 percent of the company’s outstanding shares can amount to as much as 20 to 30 percent of the shares actually available for actual trading, allowing stock manipulators to drive down the share price with naked shorts that still do not breach the 0.5 percent ceiling set by Regulation SHO. If the 0.5 percent standard for threshold securities is retained, the Commission at a bare minimum should apply it to registered shares available for free trading, not to outstanding shares.
“These and other provisions of the final Regulation SHO are far weaker than even the draft version. The final Regulation has dropped a provision from the earlier draft that would have directed clearing agencies to report to the National Association of Security Dealers and the designated examining authority any investor failing to deliver.”
More important, stated Shapiro, the final Regulation eliminated a promising proposal in the draft version that would have withheld the benefits of mark-to-market payments (e.g., return of collateral as the share price declines) from investors who fail to deliver the shares they have sold short. Without this means of enforcing the delivery of shares sold short, those who fraudulently carry out naked short sales to manipulate the price of a company’s shares can continue to collect their profits, to the detriment of millions of honest investors.
“Regulating short sales in a way that still provides those who don’t deliver the shares they sell short with the profits from their uncompleted short sales violates the most basic principles of a fair and free market. Moreover, no outside authority will be alerted, so long as they target their fraud to any of the nearly estimated 9,000 companies whose equities are classified as ‘non-threshold’ securities, and limit the fraud in any single case to 0.5 percent of the company’s outstanding shares.”
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was “unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
Shapiro stated that by exempting from strict locate and delivery requirements any failures to deliver in equity issues with existing failures of less than 0.5 percent of their outstanding shares, Regulation SHO appears to establish an official level of acceptance and tolerance for unsettled or naked short sales.
“I respectfully submit that that these provisions could end up providing tacit SEC approval for billions of dollars in unsettled short sales. With the value of the publicly-traded shares on all exchanges and markets totaling an estimated $20.415 trillion, do these provisions effectively permit unsettled short sales of 0.5 percent of that total or an estimated $102 billion a day? I respectfully request that the SEC provide an estimate of the maximum unsettled short sales that could occur under Regulation SHO without triggering locate and delivery requirements.
“By permitting the widespread settlement failures that rightfully concern the NASAA and all honest investors, Regulation SHO effectively tolerates abuses, principally through naked short sales, that can undermine basic confidence in U.S. equity markets. Under the terms of this Regulation, naked short sellers will be able, in effect, to inject into the markets millions of shares that do not exist without triggering strict locate or delivery requirements. Whatever the legal definition, naked short sales are an economic equivalent of counterfeiting. Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.”
Shapiro urged the SEC to “reconsider the provisions of Regulations SHO and, at a minimum, apply the ‘locate and delivery’ requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.”
While the battle is still waged in the U.S., some of the threats to small investors’ investments are being exacted overseas. Despite some 250 companies winning their exit pass, the FaulkingTruth.com website reported that dozens of companies are still being refused delistings from the Berlin-Bremin Exchange, including ImageWare Systems (AMEX: IW) and Action Products International (NASDAQ: APII). FinancialWire also reported that Sontra Medical Corp. (NASDAQ: SONT) is among those whose shares Berlin has resisted delisting.
In all, Faulk said Berliner Freiverkehr CEO Holger Timm reported he has been asked by 386 firms to cease their trading. He is said to have balked at the term delisting, noting that “Trading foreign shares on the third-tier market segment at the Berlin or any other German exchange is not being regarded as a 'listing', therefore it is incorrect to use the term 'delisting' if a company wants to cease trading."
FaulkingTruth said others refused delistings include Endevco Inc. (OTCBB: ENDE), Limelight Media Group (OTCBB: LMMG), IpVoice Communications (OTCBB: IPVO), now NewMarket Technology Inc, (OTCBB: NMKT), Force Protection (OTCBB: FRCP), Cyber Digital Inc. (OTCBB: CYBD), and XRAYMEDIA (OTCBB:XRYM). Others mentioned yesterday included Military Communications Technology (OTCBB: MLTA), Dalrada Financial Corp. (OTCBB: DRDF), and Mannatech Inc. (NASDAQ: MTEX).
Timm sent a letter to companies asking to be delisted, which promised if “after considering the above aspects, should you still prefer your stocks not to be traded in Germany we will respect your wish and apply for delisting on the Berlin stock exchange.”
However, for dozens of companies, that appears to have been an empty offer.
Timm responded to Faulk that “the current situation regarding the eight companies questioned by you is as follows: ImageWare is listed on the AMEX and has been trading in Berlin since May, 3rd, 2000. Action Products is listed on NASDAQ and has been trading in Berlin since August, 10th, 1999. Endevco has been trading in Berlin since October, 22nd, 1999 with relevant retail trading volume (e.g. 1,855,440 shares traded in 2004). New Market Technologies has been trading with small volumes in Berlin since November, 24th, 2003. Force Protection and Xraymedia have commenced trading in February and March of this year. Because of the trading activities (trading in Force Protection totalled 40,000 shares and Xraymedia totalled 150,000 this year) the exchange refused the cessation of trading in these stocks.”
Officials of the Berlin exchange, however, were not as clear about the trading activities or lack of them.
As to its meetings with U.S. regulators from the U.S. Securities and Exchange Commission and the NASD, Timm reportedly stated: "We met the officials once on June 4th, but were not further involved in any talks or meetings. I know that the German exchanges and the German surveillance authorities continue with their talks but I am unaware of the status quo. Particularly, I am unaware of any efforts being made in the US to stop obvious short selling practices. I have got the impression from numerous conversations, that in the meantime many companies understand that Germany is not a place for short selling practices against US companies."
In a comment letter to the U.S. Securities and Exchange Commission, Larry Thompson, Managing Director and Senior Deputy General Counsel for the DTCC, said it is a violation of Section 17A of the Securities Act of 1934 to impose any process or restriction that would cause delays in the settlement process, said the online newsletter, published by http://www.investigatethesec.com.
“Although not the intent of the comment letter, Mr. Thomson has just become part of a growing number of people who contend that the most recent short selling reform package out of the SEC, Regulation SHO, may not be in compliance with federal law.
“The letter submitted to the SEC on August 16, 2004 was addressing the SEC’s proposal to restrict all transfer agents from clearing trades on those issuers who created a ‘Custody Only”’ restriction on the trading of their securities,” noted the newsletter.
“Many companies have, in the past sought out this ‘self-help’ measure to reduce the abuses of naked short selling. Without regulatory support in the fraud this was the only possible means of protection available to these issuers. Thomson, whose agency would stand to lose business by this ‘Custody Only’ style of trading, was agreeing with the SEC’s proposal when he ventured into the legal aspects of the issuers proposed restrictions.
“His legal points, presumably unintended, actually shot squarely across the bow of the SEC’s Regulation SHO,” said StockGate Today, pointing to http://www.sec.gov/rules/proposed/s72404/s72404-14.pdf
“The Proposed Rule furthers the goals articulated by Congress when it adopted Section 17A of the Exchange Act in that the Proposed Rule will, among other things, promote the prompt and accurate clearance and settlement of securities transactions and eliminate the delay, inefficiencies and unnecessary costs inherent in "certificate only "trading sought to be imposed by certain issuers.
Actually, said the publication, the statute referenced, Section 17A of the Securities Act repeatedly states: “The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.”
“Thompson concludes his opinion letter to the SEC by surmising that the SEC should proceed on with this proposal as written because issuers are not authorized to put restrictions on their stock. For transfer agents to clear these stocks would be aiding and abetting unlawful conduct. The point of law being the settlement requirements defined in Section 17A of the Securities Act of 1934.
“Thus, asked the newsletter, with Thompson “claiming that a delay in the settlement of trades is unlawful how can Regulation SHO be grounded by the presumption that trade settlements are not a mandatory part of the Markets?
“The SEC, in Regulation SHO claims that 4% of all publicly traded companies have levels of settlement failures that exceed an abusive threshold. They also admit that in some cases the failures exceed the entire public float of companies. These are market conditions not only create delays and inefficiencies but fraud and manipulation as well. The SEC’s final package never addressed forced settlements and forced timelines on the failures but instead simply threatened ‘future enforcement’ possibilities and placed “restrictions’ above abusive levels.
“The NASD tried to impose a 10 day mandatory window for settlement on fails and the SEC shot down their proposal.
“If the SEC claims the failures under the present DTCC/NSCC settlement system results in 4% of our companies failing above an abusive level, and agrees that delays in settlement are against the law, where is the enforcement of the Securities Act today?” asks the newsletter.
Rumors have been rampant for weeks that the SEC and NASD are at odds over the NASD’s proposals for stronger regulations to squelch illegal market manipulation, proposals that apparently have fallen on deaf ears at the SEC. The frustration boiled over recently when NASD officials responded to inquiries from Dave Patch, editor of Stockgate Today, by venting against criticisms they themselves were being too soft on fraudsters, money launderers and offshore hedge funds who lurk among the illegal naked short sellers.
Patch editorialized that the individual interviewed by the PIPES Report should be terminated.
“By my interpretation, this SEC spokesman has just admitted that they are willing to allow the abuse to take place and only initiate penalties after settlement failures have reached abusive levels. While the SEC does place this restriction of ‘pre-borrowing’ for future short sales, it only becomes a restriction once the failures in settlement reach above a certain abusive threshold.,” said Stockgate Today.
“The SEC never then forces the trades that failed settlement above this level to be immediately settled either. So where is the pain?
What prevents the criminals from attempting the crime? “The NASD’s proposal, unlike the SEC’s, would eliminate any and all opportunity to reach that abusive threshold in the first place as they focus on forcing trades to settle promptly as mandated in Section 17A of the Securities Act.”
Patch said the NASD proposal, now in jeopardy at the SEC, “forces the market to act responsibly.”
Stockgate Today noted that the SEC, in going forward with Regulation SHO, has ignored the NASD, North American Association of Securities Administrators, investors and issuers.
The final Regulation SHO rules are at http://www.sec.gov/rules/final/34-50103.htm. The trade reporting requirements are at http://www.nasdr.com/2610_2004.asp#04-54.
Recently it was reported that regulated companies, such as dealers, brokers, mutual fund companies, financing firms, and investment houses, have been told they have to submit revised operating manuals to incorporate changes in the Anti-Money-Laundering Act of 2001 by Oct. 29.
The key is a requirement that regulated firms “must know their customers” to prevent money-laundering practices. The firms have to have a procedure to get satisfactory proof of the customer's identity and ensure that effective procedures for verifying the identity of new customers are in place.
Although prospective clients should be interviewed personally, procedures for verification of accounts without face-to-face contact include independent verification of the home or business numbers for telephone interviews, and possible confirmation of employment.
Those outside the country must submit passports, birth certificates, driver’s licenses, employment identification cards or incorporation and partnership papers for corporate accounts, authenticated by a consulate.
However, FinancialWire interviews with spokespersons at the SEC has determined that individuals may open nominee offshore firms without providing their identities to anyone, and by using a multiple number of such nominee firms can even gain complete control of a public company while never revealing their true identities.
The SEC told FinancialWire that it has no power to require identification of individuals behind such firms.
Columnist Jack Anderson has stated that millions if not billions of dollars are laundered through naked short selling schemes.
Meanwhile, opponents of the illegal schemes await the SEC’s acknowledgement of a public NASD proposal that mandates guaranteed settlement of trades after a specifically defined time limit of failure. The SEC and the NASD had apparently hoped the issue would just die, as the proposal is much tougher than the watered-down Regulation SHO that is now on the way to becoming law and implemented in January, 2005.
In an email seen exclusively by FinancialWire, Marc Menchel, Executive Vice President and General Counsel of NASD’s Regulatory Policy and Oversight’s Office of General Counsel, told Patch that “it is not unusual for the SEC and NASD to propose courses of actions that differ in scope and practice as has happened here. The SEC, after thorough deliberation from our point of view, has spoken to this matter in the adoption of Reg SHO. At this juncture, we are considering whether further amendments are warranted to our proposal.”
Menchel said that indeed “NASD and SEC have been in conversations on this topic and both have pursued courses of rulemaking to address the topic.”
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its “stock borrow” program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice.”
All this has led to some major changes on Wall Street, if not regulatory attentiveness.
Charles Schwab & Co. recently said it is exiting the market-making business. It is one of several market makers that have been the subject of accusations and/or legal entanglements over naked shorting allegations and issues.
The company had said it is either the number one or number two market-maker in more than half of all of NASDAQ’s (OTCBB: NDAQ) listed stocks.
Recently observers were surprised to find a comment letter submitted to the SEC by Mike Alexander, Senior VP of Charles Schwab, that admits outright that brokerages regularly ignore rules and regulations, saying it is not rules that need to be written; it is changes in behavior that is needed.
The comments were directed towards proposed changes in the U.S. settlement system, but could easily apply to other regulations as well.
“Improvements in the U.S. settlement system will only be truly achieved if and when regulations are rationalized to ensure that all market participants are held accountable for compliance. For example, the industry has struggled with the issue of institutional trade affirmation for quite some time now. While the benefits to the clearance and settlement system are self-evident, Buy-Side firms and Custodian banks have been resistant to make those changes that provide for same-day trade confirmation / affirmation and assurance of trade settlement,” said Alexander.
“Schwab opposes the notion that securities intermediaries such as broker-dealers be required to police compliance,” he stated. “The NYSE and other SROs have had trade affirmation rules on their books for some time. However, such rules have not been effective in changing the behavior of Buy-Side firms or their custodians; nor do the rules provide assurance that the affirmed trade will settle.
“Recognition of this fact is evidence that changes to the settlement cycle not only require overhauling systems, but also changing behavior. We believe that only by holding all market participants directly accountable for making required affirmations will the necessary changes to behavior,” he stated at http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf .
In a June 23 release, the SEC stated it has put into place Rule 202(T), which establishes procedures to allow the Commission to temporarily suspend the operation of the current "tick" test in Rule 10a-1, and any short sale price test of any exchange or national securities association, for specified securities.
Through a separate order, the Commission will suspend, on a pilot basis for a period of one-year, the tick test provision of paragraph (a) of Rule 10a-1, and any short sale price test of any exchange or national securities association, for approximately one-third of stocks in the Russell 3000 index.
The order also will suspend, on a pilot basis for a period of one year, the tick test provision of paragraph (a) of Rule 10a-1 for short sales executed in any security included in the Russell 1000 index after 4:15 p.m. Eastern, and all other securities after the close of the consolidated tape, and until the open of the consolidated tape the next day.
The pilot will commence on January 3, 2005 to permit broker-dealers and self-regulatory organizations to make the necessary programming adjustments.
The Commission deferred consideration of the proposal to replace the current "tick" test of Rule 10a-1 with a new uniform bid test. The Commission could reconsider any further action on these proposals after the completion of the pilot.
Rule 203, which will incorporate current Rule 10a-2 and will create a uniform Commission rule requiring broker-dealers, prior to effecting short sales in all equity securities, to "locate" securities available for borrowing.
There will be limited exceptions from the locate requirement, including for short sales by registered market makers in connection with bona-fide market making.
Rule 203 also imposes additional requirements on designated "threshold securities." Rule 203 defines a threshold security to mean an equity security for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and that is equal to at least 0.5% of the issue's total shares outstanding.
Where a clearing agency participant has a fail to deliver position in threshold securities that persists for ten consecutive days after settlement, the participant must take action to close out the position. Until the position is closed out, the participant, and any broker-dealer for which it clears transactions, may not effect further short sales in the particular threshold security without borrowing or entering into a bona fide arrangement to borrow the security.
Rule 203 will become effective 30 days after publication with a compliance date of January 3, 2005, to permit firms to make programming and procedural adjustments.
Rule 200, which among other things, will redesignate current Rule 3b-3 with some modifications to define ownership and aggregation of securities positions, and include a requirement to mark all sell orders in all equity securities. Rule 200 will become effective 30 days after publication.
The Commission also adopted amendments to Rule 105 of Regulation M to remove the current shelf offering exception, and issued interpretive guidance addressing sham transactions designed to evade the rule.
The amendment applies to short sales effected within five days prior to the pricing of a shelf offering. Such short sales may not be covered with offering securities purchased from an underwriter or other broker-dealer participating in the offering.
The Rule 105 amendments will be effective 30 days after publication in the Federal Register, and the interpretive guidance will be effective upon such publication.
Opponents of naked short selling were, however, quick to denounce the provision that allows market makers an exemption, and many market observers said that the SEC should provide a public list of companies that fall into the “threshold security” category.
“The SEC claims that the number of companies involved in this ‘threshold security’ category is 4% of all publicly traded companies. If in fact it is that small the process is certainly manageable,” said the website InvestigatetheSEC.com at http://www.investigatethesec.com . “It is also the right of every issuer, in protecting their business and their investors to know the status of their stock trading.”
Some were discussing whether the SEC can keep such information private under the Freedom of Information Act.
The marketplace is already upset over promises by the Berlin Stock Exchange, since broken, that it would delist any company upon request.
“Please understand that cessation of trading in the shares of XRAYMEDIA Inc. (OTCBB: XRYM) is not possible,” the exchange told one such requester.
It’s not just U.S. companies such as Whistler Investments (OTCBB: WHIS), Sonoran Energy (OTCBB: SNRN), Celsion Corporation (AMEX: CLN), and eLinear Inc. (AMEX: ELU) or Israeli companies that have had serious concerns about their unannounced and unathrorized listings on the Berlin-Bremen Stock Exchange.
Apparently, some 150 British companies are protesting the same fate.
A number of UK-listed companies have demanded a London Stock Exchange investigation after they found that their shares are being traded.
Meanwhile, Whistler, Sonoran and eLinear have announced they have successfully secured their delistings, and the U.S. Securities and Exchange Commission has rescheduled its open hearing to consider the adoption of amendments to Regulation Sho to October 4 at 9:30 a.m. The announcement is at http://www.sec.gov/news/digest/dig061504.txt .
According to the London Money Telegraph, “several companies believe the market for their shares has been distorted and that they have fallen in value after trading started on the Berlin-Bremen exchange.
“Some smaller companies, whose shares are lightly traded in London, fear the Berlin market has been used by speculators to short-sell their shares.”
The Telegraph said the number of companies are thought to be as high as 150, including even “larger companies” such as Matalan (OTC: MATNF) and Halfords.
Mladen Ninkov, the chairman of Aim-listed Griffin Mining (OTC: GFNMF), was quoted as saying: "We were put on the Berlin market without our knowledge by a German broker and now we've got about 8m shares out in a short sale. It is horrifying - that is about 4 per cent of the company and it is forcing the price down."
A spokesman for the London Stock Exchange said: "If there is evidence of market abuse we would refer that on to the appropriate authorities."
Whistler said that according to its transfer agent records, “we have 5,504,680 shares held by DTC, but the ADP broker search indicates of 6,217,458 shares being reported by broker/dealers as being held on behalf of their customers, indicating a short position of more than 700,000 shares. A summary report can be viewed at http://www.whistlerinvestments.com/shorts.html .
“We have therefore commenced work with DTC for a formal review of the reported excessive broker/dealer holdings of our stock so that we can conduct our corporate affairs properly in view of our planned stockholders meeting and other upcoming corporate matters. We again advise our stockholders make sure that they receive delivery of any shares that they purchase, and also that their stock is not being borrowed without authorization.
Holly Roseberry, President of Whistler Investments, states "We intend to get to the bottom of the excessive short position and bring stability back into the trading of our stock. We're happy to say that we have 5,133 stockholders and we expect all our stockholders to benefit from the shorters having to cover their short positions.”
FinancialWire has reported on the disclosure that “Dateline,” the investigatory TV program aired by General Electric’s (NYSE: GE) NBC unit, has purportedly been preparing a blockbuster expose of “Stockgate” (see separate story at http://www.financialwire.net).
It is not known if “Dateline” has uncovered continuing underworld connections to the scandal, but FinancialWire reported that Dateline may be pointing a large finger of conflict at the U.S. Securities and Exchange Commission itself, which reportedly receives a slice of every transaction fee as part of its budget. According to court filings supported by the O’Quinn/Christian legal network, almost $1 billion annually is received by the Depository Trust and Clearing Corp. for its “Stock Borrow Program,” which the lawsuits claim is just a fancy name for counterfeiting, as the DTCC purportedly lends out many multiples of the actual certificates in the float. Apparently the SEC receives a transaction fee for each transaction facilitated by these loans of non-existent certificates, which could knock a hole in its budget should the revenues from the practice be halted.
The North American Securities Administrators Association, comprised of state and Canadian regulators, has pointedly told the SEC that either it must rethink its cozy DTCC relationship, or it hints, some of its more aggressive state practitioners (think Eliot Spitzer) may do the rethinking for the SEC.
Naked short selling is worrisome for hundreds of small U.S. companies, including those recently asking to be delisted from the Berlin Stock Exchange, such as Golden Phoenix Minerals, Inc. (OTCBB: GPXM), Nannaco, Inc. (OTCBB: NNCO), 5G Wireless Communications, Inc. (OTCBB: FGWC), CyberAds, Inc. (OTCBB :CYAD), Provectus Pharmaceuticals, Inc. (OTCBB: PVCT), House of Brussels Chocolates (OTCBB: HBSL), InforMedix, Inc. (OTCBB: IFMX), Tissera, Inc. (OTCBB: TSSR), Americana Publishing, Inc. (OTCBB: APBH), Celsion Corporation (AMEX: CLN), ChampionLyte Holdings, Inc. (OTCBB: CPLY), Pickups Plus, Inc. (OTCBB:PUPS), China Wireless Communications Inc. (OTC BB: CWLC), CareDecision Corp. (OTCBB: CDED), Titan General Holdings, Inc. (OTCBB: TTGH), IPVoice Communications, Inc. (OTCBB: IPVO), Whistler Investments (OTCBB: WHIS), WARP Technology Holdings, Inc. (OTCBB: WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (OTCBB: ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (TSX: NHC; OTCBB: NHCMF), Stratus Services Group, Inc. (OTCBB: SERV), Golden Phoenix Minerals, Inc. (OTCBB: GPXM).
Berliner Freiverkehr (Aktien) AG has been singled out as the broker and market maker that has been “listing” the companies. It is suspected that one broker, RA Angsar Limprecht, is involved in all if not most of the listings.
Small public companies are squeezed not only by hedge funds, naked short sellers, overseas listers such as the Berlin Stock Exchange, and the out-of-control “Stock Borrow Program” run by the governance-conflict-laden Depository Trust and Clearing Corporation, but to the amazement of the industry, as often and not by their own regulators.
A new staff recommendation by Annette Nazareth, director of the division of market regulation at the U.S. Securities and Exchange Commission to “outlaw” ownership of paper certificates at the same time the Depository Trust and Clearing Corporation is under intense scrutiny for alleged electronic counterfeiting has begun hitting the small public company markets, company executives, shareholders and manipulative short-selling opponents like the proverbial ton of bricks.
A Dow Jones (NYSE: DJ) article by Judith Burns sparked the uproar, as the inextricably intertwined web of connections between the SEC and the DTC, which is sagging from the weight of conflicted governance by representatives from a rollcall of industry heavyweights, including NASD, which owns NASDAQ (OTCBB: NDAQ), the New York Stock Exchange, Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH), to name only a few.
The rule proposal would bar stock transfer agents from handling shares that carry any limitations on transfer. Control over stock certificates is one of the ways that small companies have combated illegal naked short sellers. Burns quoted Nazareth as saying that these companies’ “self-help” efforts “aren’t helping U.S. markets overall.” Nazareth was quoted as saying restrictions on stocks are “a significant step backwards” in the “move from paper stock certificates to automated computerized trading.”
Nazareth said that abusive “naked” short selling has been a problem “in some cases,” but that is “best dealt with by a pending SEC proposal,” presumably Regulation SHO.
SEC Commissioner William Donaldson purportedly publicly refused to answer any questions from the NASD about the timing of the Commission’s consideration of the Regulation at a conference where he was simultaneously proposing early reforms of the mutual fund scandals. The Dow Jones said, however, that Robert Colby, SEC deputy market regulation division director, predicted the SEC will take that to a vote in early June.
The Dow Jones report noted that “naked short-selling occurs when sellers don't buy shares to replace those they borrowed, a manipulative practice that can drive a company's stock price sharply lower.
The stock certiticate plan has been put to a 30-day comment periodl Then the SEC would have to vote to adopt it. If adopted, Colby was quoted as saying that regulators might “sue firms that seek to impose restrictions on stock transfers.”
The recent lawsuit filed by Nanopierce Technologies (OTCBB: NPCT) alleges that the Depository Trust and Clearing Corp. has a lot of reasons, almost one billion of them a year, to keep illegal naked short selling in operation. It was the shot across the bow by the legendary Houston law firms of Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, all brought to their knees.
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. “Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors,” and have resulted in over 7,000 public companies having been “shorted out of existence over the past six years.” Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the “sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy.”
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O’Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
Recently the NASD and U.S. Securities and Exchange Commission approved an interim naked short-selling band-aid, requiring U.S. brokers to make an “affirmative determination” that short-sellers, even foreign short-sellers, mostly Canadian, can find certificates to cover before processing the order.
Last year, many besieged public companies sought refuge from the manipulation by seeking to exit the DTC, but on October 4, 2003, the SEC stated “the issues surrounding naked short selling are not germane to the manner in which DTC operates as a depository registered as a clearing agency. Decisions to engage in such transactions are made by parties other than DTC. DTC does not allow its participants to establish short positions resulting from their failure to deliver securities at settlement. While the Commission appreciates commenters' concerns about manipulative activity, those concerns must be addressed by other means.”
The Nanopierce lawsuit, said to be the first of many out of the box, emphatically suggests otherwise. According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the “Stock Borrow Program.”
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. “There are numerous cases of a single share being lent ten or many more times,” giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
“Such re-hypothecation has in effect made the potential ‘float’ in a single company's shares virtually unlimited and the term ‘float’ meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence.” Burrell said the Christian/O’Quinn lawsuits will seek to show that the “counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the ‘Sale of Unregistered Securities’.”
While the Nanopierce lawsuit has been filed at the state level, another companion lawsuit just heading to the courts on behalf of Exotics.com (OTC: EXII) will be argued at the Federal level.
Nanopierce’s suit in the 2nd Judicial District Court in Nevada, is Case No. CV04-01079, alleges that the DTC’s “stock borrow program” was “purportedly created to address SHORT TERM delivery failures,” but that the “end result of the program has been to create tens of millions of unissued and unregistered shares to be traded in the public market,” and in some instances resulting in “two or more shareholders who purchase shares in separate transactions to own the same shares.”
The complaint alleges that the DTC has a colossal disincentive to stop the “stock borrow” program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that “open positions” resulting from this activity at the close of business on December 31, 2003, “approximated $3,025,467,000” due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC’s “Stock Borrow Program.”
Nanopierce claims that DTCC and NSCC have joined in a “scheme” to “manipulate downward the price of the affected securities, thereby reducing the market value of the open fail to deliver positions.” The suit also claims that the s have permitted sellers to maintain open fail to deliver positions of tens of millions of shares for periods of a year and even longer.
It quotes the National Association of Security Dealers as admitting that “concerns have been raised by members, issuers, investors and other interested parties about potentially abusive short selling activities occurring in the marketplace. In particular, naked short selling, or selling short without borrowing securities to make delivery, can result in long term failures to deliver, including aggregate failures to deliver that exceed the total float of a security. NASD believes such extended failures to deliver can have a negative effect on the market. Among other things, by not having to deliver securities, naked short sellers can take on larger short positions than would otherwise be permissible, which can facilitate manipulative activity.”
Nanopierce claims that it had “relied on material misrepresentations and omissions by DTC and NSCC in trading its shares in the stock market “without knowledge of s’ fraud-on-the market through statements they made about the clearing and settlement services they provided.” Further, it claims that the s acted with “scienter” since they had a major financial financial motivation to falsely represent their services, which Nanopierce claims are also anticompetitive.
The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC’s October 4 ruling indicates, its monopoly over the electronic trading system appears even to be protected.
The Depository Trust and Clearing Corp.’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
As the Nanopierce lawsuit reveals, those were indeed strong words, meddling as it did, in a substantial revenues base for the DTCC.
Recently, leading market makers and brokers named in various lawsuits and other actions, including FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group, Bank of America's (NYSE: BAC) Banc of America Securities LLC, Societe Generale's (OTC: SCGLF) SG Cowen Securities Corp. vFinance, Inc. (OTCBB: VFIN), Knight Trading Group, Inc. (NASDAQ: NITE), A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), and ETrade Group, Inc. (NYSE: ET), were forced to comply with new short-selling market regulations imposed by the NASD after the SEC had “sat on” the NASD request to plug material loopholes for almost 2-1/2 years.
“The new rules expand the scope of the affirmative determination requirements to include orders received from broker/dealers that are not members of NASD ("non-member broker/dealers").
The new rule is on the web at http://www.nasdr.com/2610_2004.asp#04-03
The rule itself, while welcomed by small companies and their shareholders in the U.S., nevertheless raised an outcry because the NASD’s request to put it into effect had set on a shelf at the SEC since 2001.
The scandal has embroiled hundreds of companies and dozens of brokers and marketmakers, in a web of internaitional intrigue, manipulative short-selling and cross-border acctions and denials.
Comments on Regulation SHO ended January 5, and may be viewed at http://www.sec.gov/rules/proposed/s72303.shtml .
Some 122 companies, including 13 brokers, such as FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group and vFinance, Inc. (OTCBB: VFIN). A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), Knight (NASDAQ: NITE) and ETrade Group, Inc. (NYSE: ET), have been embroiled for over a year in a raging controversy
The remaining 109 companies among the 122 named to date have issued press releases or been named in the media as having been victimized, or as taking various actions, either alone or in concert with other companies, to oppose manipulative trading in the form of illegal naked short selling. The actions have ranged from lawsuits to withdrawals and threatened withdrawals from the electronic trading system managed by the Depository Trust & Clearing Corp., to withdrawals from toxic financings, to the issuance of dividends or name changes designed to squeeze manipulators, to joining associations or networks or to contacting regulatory authorities to provide documentation of abuses or otherwise complain.
The complete list of those 108 companies include Advanced Viral Research Corp. (OTCBB: ADVR), AdZone Research, Inc. (OTCBB: ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (OTCBB: AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (OTC: ATSC), Federal Agricultural Mortgage / Farmer Mac (NYSE: AGM) Allied Capital (NYSE: ALD), American Motorcycle (OTC: AMCYV), American International Industries (OTCBB: AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (OTC: ATSC) Bluebook International (OTCBB: BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (OTCBB: BIFT), Biocurex (OTCBB: BOCX). Broadleaf Capital Partners, Inc. (OTCBB: BDLF), Chattem, Inc. (NASDAQ: CHTT), Critical Home Care (OTCBB: CCLH), Composite Holdings (OTC: COHIA), CyberDigital, Inc. (OTCBB: CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (NASDAQ: DCEL), Eagle Tech Communications (OTC: EATC), Edgetech Services (OTCBB: EDGH);
Also, Endovasc Ltd. (OTCBB: EVSC), Enviro-Energy Corporation (OTCBB: ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (OTCBB: ESWW), EPIXTAR Corp. (OTCBB: EPXR), eResearchTechnologies, Inc. (NASDAQ: ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (NYSE: FRE), FreeStar Technologies (OTCBB: FSRCE), Front Porch Digital,
Inc. (OTCBB: FPDI), Geotec Thermal Generators, Inc. (OTCBB: GETC), Genesis Intermedia (OTC: GENI), GeneMax Corp. (OTCBB: GMXX), Global Explorations Inc (OTC: GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (OTC: HPON), H-Quotient, Inc., (OTCBB: HQNT), Hyperdynamics Corp. (OTCBB: HYPD), International Biochem (OTCBB: IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (OTCBB: IBCS), InternetStudios, Inc. (OTCBB: ISTO), ITIS Holdings (OTCBB: ITHH), Investco Corp. (OTCBB: IVCO), Lair Holdings (OTC: LAIR), Lifeline BioTechnologies Inc. (OTC: LBTT), Life Energy & Technology (OTCBB: LETH), MBIA (NYSE: MBI);
Also, MegaMania Interactive (OTC: MNIA), MetaSource Group, Inc. (OTCBB: MTSR),Midastrade.com (OTC: MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (OTC: MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (OTCBB: NPCT), Nutra Pharmaceutical (OTCBB: NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (OTC: NVGV), Orbit E-Commerce, Inc. (OTCBB: OECI), Pitts & Spitts (OTC: PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (OTC: PYST),Petrogen Corp. (OTCBB: PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (OTCBB: PDVN), PrimeHoldings.com, Inc. (OTC: PRIM), Phlo Corporation (OTCBB: PHLC), Resourcing Solutions (OTC: RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (NASDAQ: SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (OTCBB: SDNA);
Also, Sionix Corp. (OTCBB: SINX), Sonoran Energy (OTCBB: SNRN), Starmax Technologies (OTC: SMXIF), Storage Suites America (OTC: SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (NASDAQ: SPRI), Technology Logistics (OTC: TLOS), Swiss Medica, Inc. (OTCBB: SWME), Ten Stix, Inc. (OTCBB: TNTI), Tidelands Oil (OTCBB: TIDE), Titan Construction (OTC: TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (OTCBB: USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (AMEX: VRA), Viragen International (OTCBB: VGNI), Vista Continental Corporation, (OTCBB: VICC), Viva International (OTCBB: VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (OTCBB: WIZD), WorldTradeShow.com (OTC: WTSW) and Y3K Secure Enterprise Software, Inc. (OTCBB: YTHK).
Earlier in 2003, the SEC fined Rhino Advisors, Inc., $1 million for its representation of Amro International in the financing and manipulation of Sedona Corp. Amro, also known as AMRO, was registered in Panama, a secretive offshore haven, but was not named in the SEC settlement. Another 60 public companies may have been manipulated by the fined Rhino Advisors and its indicted principals, or its funding apparatus, Amro.
These include:
All American Food Group Inc (OTC: AAFGQ), Amanda Co Inc (OTC: AMNA), Antra Holdings (OTC: RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AMEX: AVN), Bionutrics Inc (OTC: BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (NASDAQ: BUTL),Calypte Biomedical Corp (OTCBB: CYPT), Chemtrak Inc/DE (OTC: CMTR), Clicknsettle Com Inc (OTCBB: CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (OTC: CLWB), Dental Medical Diagnostic Systems Inc (OTC: DMDS), Detour Media Group Inc (OTC: DTRM),
Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (OTC: DISS), International Inc (OTC: DYNX), Endovasc Ltd Inc (OTCBB: EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (OTC: FRBW), Greystone Digital Technology Inc (OTC: GSTN), Havana Republic Inc/FL (OTCBB: HVNR), Henley Healthcare Inc (OTC: HENL), Hollywood Media Corp (NASDAQ: HOLL), Ibiz Technology Corp (OTCBB: IBZT), Diagnostic Systems Inc/FL (OTCBB: IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (OTCBB: RDOC),
Also, Interferon Sciences Inc (OTC: IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (OTC: THMZ), Medisys Technologies Inc (OTC: SCEP), Milestone Scientific Inc/NJ (AMEX: MS), Nevada Manhattan Group Inc (OTC: NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OTC: OSYM), Pacific Systems Control Technology Inc (OTCBB: PFSY), Professional Transportation Group Ltd Inc (OTC: TRUC), Rnethealth Inc (OTC: RNTT),
Also, Sand Technology Inc (NASDAQ: SNDT), Sedona Corp (OTCBB: SDNA), Silverado Foods Inc (OTC: SVFO), Stockgroup Information Systems (OTCBB: SWEB) Surgilight Inc (OTC: SRGL), Tasty Fries Inc (OTCBB: TFRY), Tech Laboratories Inc (OTCBB: TCHL), Teltran International Group Ltd (OTC: TLTG), Titan Motorcycle Co of America Inc (OTC: TMOTQ), Trans Energy Inc (OTCBB: TSRG), Motorcycle Co (OTC: UMCC), Universal Communication Systems Inc (OTCBB: UCSY), Medical Systems Inc (OTC: UMSI), Vianet Technologies Inc (OTC: VNTK),Viragen Inc (AMEX: VRA), Webcatalyst Inc (OTC: WBCL), Worldwide Wireless Networks Inc (OTCBB: WWWNQ), and ZAP (OTCBB: ZAPZ).
For up-to-the-minute news, features and links click on http://www.financialwire.net
FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp
Listen to StreetSignals™ (Investrend "ON-THE-AIR") "live" Saturdays from 9 p.m. to 10 p.m. on stations coast-to-coast, or right now on the web at http://www.BusinessTalkRadio.net.
The FinancialWire NewsFeed is now available in multiple formats to your site or desktop, free. Click on: http://www.investrend.com/XmlFeeds?level=268
http://www.investrend.com/articles/article.asp?analystId=0&id=10837&topicId=160&level=16...
For most of last year a 14.5 metre diameter exploration shaft was being sunk down to a depth of 250 metres.
Should read 4.5 metre (14'- 5") diameter ...
Minews Story
Date: October 04, 2004
Shore Gold Moves Ahead of Kensington Resources In The Saskatchewan Diamond Stakes.
Minews has long considered the chances of the two main operators in Saskatchewan having economic diamond mines to be high. The Star kimberlite project owned by Shore Gold is huge and the cluster of pipes at Fort a La Corne, where Kensington Resources is in joint venture with De Beers and Cameco, is also big on a world scale and both are diamondiferous. This takes them a long way down the road, but for many years it has been thought that the diamonds would prove to be too small. The bulk sampling in progress at Star is starting to disprove this and, of course, the economics of working in Saskatchewan close to infra-structure and in relatively mild weather makes a huge impact on costs when compared with Nunavut and the Northwest Territory.
In the last year new CEOs with Scottish heritage have taken over at both Kensington and Shore Gold and there is an interesting difference between the two. Robert McCallum at Kensington was introduced to Minews as being the right man to stand up to De Beers which has long given its junior partner a difficult time. This has been faithfully chronicled on these pages, but now McCallum has cut off all contact which looks as if he may be acting on orders. He seems disinterested in promoting the company outside the confines of Canada which seems a little odd as one of the major problems faced by both companies in recent years has been to maintain investor interest during a long drawn out programme of exploration.
A look at the graph of the share price of Kensington shows that its price is around where it was last March with a dip in between. Shore Gold, however, is powering ahead under the guidance of Mr Kenneth MacNeill as it should be with several bits of good news under its belt recently and a strong market in rough diamonds. The company is currently engaged on a 25,000 tonne bulk sample in order to recover a parcel of 3,000 carats to determine the value per carat of run-of mine ore. For most of last year a 14.5 metre diameter exploration shaft was being sunk down to a depth of 250 metres. The sinking of the shaft alone produced around 5,000 tonnes of ore and lateral drifting at various levels will provide the rest. A 10 tone/hour modular Dense Media Separation plant is processing the kimberlite ore concentrate is being forwarded to SGS Lakefield Research for final diamond picking. After this the stones will be subject to independent valuation.
In July Shore Gold recovered a 19.7 carat diamond, which tends to disprove the theory of small stones and the latest results are equally encouraging. At just over the half way stage 1,589.7 carats have been recovered from 13,129 dry tonnes processed. The rate of recovery will therefore have to improve slightly to achieve the bulk sampling target, but the three largest stones in the latest 196 carat parcel were 12.84 carats, 8.33 carats and 4.05 carats to give an average grade of 19.58 carats/100 tonnes. As the company points out , large diamonds are being found throughout the underground development and are more prevalent in the Early Joli Fou equivalent kimberlite than the last Joli Fou.
It ain’t over until the fat lady sings, but Beny Steinmetz clearly thinks she is coming out of her dressing room and Beny knows quite a lot about diamonds.. He is already a shareholder through Magma Diamond Resources which is part of Steinmetz Diamond Group. This company is one of the world’s largest integrated diamond marketing and trading companies with offices in Antwerp, Tel Aviv, Mumbai, Johannesburg, New York and Chicago. Shore Gold has just raised C$27.5 million by a private placement and Steinmetz chipped in C$2.64 million to maintain Magma’s 9.4 per cent holding. This is hardly the action of a man who is pessimistic about the results from the bulk sampling programme. He may be in international investor with extensive holdings in natural resources, engineering and real estate as well as diamonds, but every dollar counts. Shore Gold, of course, has the advantage over Kensington that it owns the Star diamond project 100 per cent and it cleared out its gold assets in the summer to simplify the corporate structure. One to watch.
http://www.minesite.com/storyFull.php?storySeq=128
Elvis,
It's supposed to be in todays Regina Leader Post. I don't subscribe to the paper.
This is where I got it from ...
http://www.stockhouse.com/bullboards/viewmessage.asp?no=8468228&tableid=0
FORT A LA CORNE
Sask. has diamonds in its future
Barry Glass
Saskatchewan News Network
Saturday, October 02, 2004
FORT A LA CORNE -- Although many hurdles are yet to be cleared, the president of a Victoria-based diamond exploration company believes Saskatchewan will be a significant location in the world's diamond industry.
Robert McCallum, president of Kensington Resources Ltd., spoke to more than 30 people on a recent tour of the company's joint venture claims in the Fort a la Corne area, 70 kilometres northeast of Prince Albert.
He noted Saskatchewan's uranium and potash industries have been instrumental in creating a worldwide reputation for the province as a great location for mining.
"We believe it won't be too long until diamonds is added to this as well," said McCallum. "We really believe there's momentum building at Fort a la Corne."
The company's partners in the joint venture are De Beers Canada Exploration Inc., Cameco Corporation and UEM Inc.
A task force has recently been formed by the partners to look at ways to accelerate a development decision on the project.
The partners have also embarked on a $7.62-million drilling program for 2004-2005, their largest to date.
McCallum said one of the things that they have to continue to impress on investors and other interested parties is how large the project is.
The size and number of kimberlite pipes, a type of ore formation which sometimes carries diamonds, are staggering, said McCallum.
The joint venture has claims on more than 60 kimberlite bodies with a total mass of roughly 10 billion tonnes.
"That's enough to swallow up all other kimberlites in existence," said McCallum.
As far as they know currently, 45 of the kimberlites are diamondiferous and 30 of those contain macrodiamonds, which are stones with at least one side greater than 0.5 millimetre.
The drilling and modelling programs underway are meant to eventually determine the grade and value of the diamonds, but McCallum said all attributes of the project point to a low-cost potential mine.
The close proximity to the North Saskatchewan River, the electrical grid, a paved highway and many small communities nearby to provide a reliable and stable source of labour are among those attributes, said McCallum.
However, any mine, if feasible, is more than eight years away in the best-case scenario.
Even so, McCallum said if it does go into development, the Fort a la Corne project easily has the potential for being the largest diamond mine in the world.
Prince Albert Daily Herald
Across the line.
http://www.kensington-resources.com/i/pdf/Newletter_V2N1_2004.pdf
Interesting information about their 2004 Work Program, shift in strategy, history of indicator minerals, assessing the mineral potential of the Fort a la Corne Kimberlites, and the last page DeBeers supports diamond exploration through diamond marketing.
Shore Gold Inc. completes closing of $27,640,000 equity financing Steinmetz Diamond Group participates
Wednesday September 29, 12:37 pm ET
Stock Symbol: SGF: TSX-VEN
SASKATOON, SK, Sept. 29 /CNW/ - Kenneth E. MacNeill, President and C.E.O. of Shore Gold Inc. ("Shore"), is pleased to announce the completion of a private placement of an aggregate of 12,563,673 units of Shore at a price of $2.20 per unit for gross proceeds to Shore of $27,640,080.60 to subscribers resident in Canada, the United States and overseas. Each unit consists of one common share and one-half of one common share purchase warrant (a "Unit"). Each whole warrant is exercisable into one common share for a period of 12 months from the closing date upon payment by the holder of $2.75 per common share. An aggregate of 11,363,673 Units were offered for sale on a best efforts basis (the "Brokered Offering") by Loewen, Ondaatje, McCutcheon Limited and Canaccord Capital Corporation acting as agents (the "Agents").
Shore paid a cash commission to the Agents equal to 7% of the gross proceeds of the Brokered Offering and issued 795,458 warrants ("Agents' Warrants") equal to 7% of the number of Units sold by the Agents pursuant to the Brokered Offering. Each Agents' Warrant entitles the holder to acquire one Unit at an exercise price of $2.20 for a period of 12 months following the closing date. The 1,200,000 Units which are not part of the Brokered Offering were sold on a private placement basis to Magma Diamond Resources Ltd. (to enable Magma to maintain its 9.4% interest in Shore). Magma is part of the Steinmetz Diamond Group, one of the world's largest integrated diamond marketing and trading companies with offices in Antwerp, Tel Aviv, Mumbai, Johannesburg, New York and Chicago. The principal of the Steinmetz Group is Mr. Beny Steinmetz, an international investor with extensive holdings in diamonds, natural resources, engineering and real estate.
All of the securities will be subject to a 4-month hold period in Canada in accordance with applicable securities laws.
The proceeds of the Offering will be used for the exploration of the Star Diamond project and for general working capital purposes.
Shore is a Canadian-based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Venture Exchange under the trading symbol "SGF".
This news release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction. The shares and warrants have not been nor will be registered under the United States Securities Act of 1933, and they may not be offered or sold in the United States absent registration or an exemption from registration.
"The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release."
http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=14555
For further information
Kenneth E. MacNeill, President & C.E.O. or George Sanders, Vice President Corporate Development at (306) 664-2202.
SGF in $Can - v.SGF
Shore at $2.90 ...
SGF CA V + 2.85 2.90 2.90 0.20 625,600
Shore Gold Inc. completes closing of $27,640,000 equity financing Steinmetz Diamond Group participates
Wednesday September 29, 12:37 pm ET
Stock Symbol: SGF: TSX-VEN
SASKATOON, SK, Sept. 29 /CNW/ - Kenneth E. MacNeill, President and C.E.O. of Shore Gold Inc. ("Shore"), is pleased to announce the completion of a private placement of an aggregate of 12,563,673 units of Shore at a price of $2.20 per unit for gross proceeds to Shore of $27,640,080.60 to subscribers resident in Canada, the United States and overseas. Each unit consists of one common share and one-half of one common share purchase warrant (a "Unit"). Each whole warrant is exercisable into one common share for a period of 12 months from the closing date upon payment by the holder of $2.75 per common share. An aggregate of 11,363,673 Units were offered for sale on a best efforts basis (the "Brokered Offering") by Loewen, Ondaatje, McCutcheon Limited and Canaccord Capital Corporation acting as agents (the "Agents").
Shore paid a cash commission to the Agents equal to 7% of the gross proceeds of the Brokered Offering and issued 795,458 warrants ("Agents' Warrants") equal to 7% of the number of Units sold by the Agents pursuant to the Brokered Offering. Each Agents' Warrant entitles the holder to acquire one Unit at an exercise price of $2.20 for a period of 12 months following the closing date. The 1,200,000 Units which are not part of the Brokered Offering were sold on a private placement basis to Magma Diamond Resources Ltd. (to enable Magma to maintain its 9.4% interest in Shore). Magma is part of the Steinmetz Diamond Group, one of the world's largest integrated diamond marketing and trading companies with offices in Antwerp, Tel Aviv, Mumbai, Johannesburg, New York and Chicago. The principal of the Steinmetz Group is Mr. Beny Steinmetz, an international investor with extensive holdings in diamonds, natural resources, engineering and real estate.
All of the securities will be subject to a 4-month hold period in Canada in accordance with applicable securities laws.
The proceeds of the Offering will be used for the exploration of the Star Diamond project and for general working capital purposes.
Shore is a Canadian-based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Venture Exchange under the trading symbol "SGF".
This news release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction. The shares and warrants have not been nor will be registered under the United States Securities Act of 1933, and they may not be offered or sold in the United States absent registration or an exemption from registration.
"The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release."
http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=14555
For further information
Kenneth E. MacNeill, President & C.E.O. or George Sanders, Vice President Corporate Development at (306) 664-2202.
NewsBlast Sign-Up
StockHouse NewsBlast: Receive company sponsored news and information via email.
OT: CorpHQ Representatives Wind Up Week of Regulatory and Congressional Meetings with CEO Council
WASHINGTON, Sept. 27, 2004 (PRIMEZONE) -- CEO Council representatives from CorpHQ Inc. (Pink Sheets:COHQ), Cybertel Capital (OTCBB:CYBT) and Investrend Communications today reported on the results of last week's meetings in Washington DC with Members of Congress and Senior Staff Members of the Securities and Exchange Commission.
The CEO Council attended the 3rd Annual SEC Small Business Forum on September 20, 2004, at SEC Headquarters. During that meeting, the Council's reform agenda was adopted by the Forum and will be placed in its minutes for submission to the Commissioners. The agenda was as follows:
1. Extend Safe Harbor for Small Business Issuers on Sarbanes
Oxley Section 404 Compliance.
2. Improve Disclosures for Non-Reporting Companies and
Streamline Regulation 15c2-11 Process.
3. Redefine Accredited Investor Designation.
4. Reg. D-504 Exempt Offering Reforms.
5. License and Legitimize Capital "Finders."
6. Remove Loopholes from Current Naked Short Sale Regulations.
On September 23, 2004, James A. "Drew" Connolly represented the CEO Council and Steve Crane, CEO of CorpHQ Inc. in "Small Business Oversight" testimony before the U.S. House Financial Services Subcommittee on Oversight and Investigations chaired by Rep. Sue Kelly (NY). The hearing, entitled, "Encouraging Small Business Growth and Access to Capital," was held to spotlight hurdles small public companies face in meeting regulatory requirements on the way to capital formation.
In his testimony, Mr. Connolly stated, "Investor protection and small business capitalization need not be mutually exclusive. Hopefully this dialog today will add to the efforts expended by many of us who are deeply concerned about both regulatory changes and creating a more fully informed investor base." The complete transcript of Mr. Connolly's testimony can be found at www.ceocouncil.net
Chairwoman Kelly granted the CEO Council an additional thirty days for pertinent information to be added to the Congressional record.
All small public company executives, directors and professionals operating within the small public company community are urged to provide their recommendations on regulatory reform and capital formation to the CEO Council for inclusion in this submission.
About the CEO Council:
The mission of the CEO Council is to provide a common voice and platform for officers and directors of public companies, and enable them to more effectively interpret and participate in the corporate governance and regulatory process to ensure compliance, to safeguard shareholder value and to clearly demonstrate a dedication to fair and ethical business practices.
CONTACT:
The CEO Council
www.ceocouncil.net
Ian Park
Legislative Affairs Director
850-345-0946
ian@ceocouncil.net
It just might happen again ...
http://www.pinksheets.com/quote/chart.jsp?symbol=CWTD&duration=2-6-9-0-0-524
Hoping for one of these ...
http://www.pinksheets.com/quote/chart.jsp?symbol=CWTD&duration=2-6-9-0-0-524
Where I trade, the first cert is $50 and the rest are $5
All $Can with TDW ... all certs must be from one issuer - size doesen't matter.
Woodrot ... I don't have the answer to your question.
Being inside quotation marks it could well have been pulled from somewhere by C&P. I took it from RB, so you could see if any discussion followed.
http://ragingbull.lycos.com/mboard/boards.cgi?board=CLB01219&read=86497
By: xxdiamondchildxx
25 Sep 2004, 12:49 AM EDT
Msg. 86497 of 86497
Jump to msg. #
Longs, I find it interesting and.....
very positive that in a CMKM Diamonds, Inc. PR that is announcing the payment delay of the UCAD dividend that Roger Glenn decides to throw his additional comments on the status of CMKM Diamonds saying... "The company's accountants are working to complete the audit of the company's financial statements. When that has been accomplished, the company will be well on its way to becoming a reporting company again." This is interesting because it is unsolicited and stands slightly off subject to the rest of the PR and I therefore feel is a clear cut signal as well as warning to shareholders, company enemies, as well as any other interested parties that CMKM Diamonds, Inc. is "THE REAL DEAL" and will be forging openly forward like the freight train it is in the very near future. In the spectrum of our overall lifetime longs, the time between now and the achievement of Roger's above stated comments as it relates to CMKM Diamond's future will be a sneeze. It is this future that will bring CMKX shareholders immense economic success IMO.
In addition, UCAD (more established in the stock market) and it's CEO Rendall Williams are not running away from UC and CMKM Diamonds, Inc.; if anything they are embracing UC and his shareholders with open arms agreeing to issue additional UCAD shares and stating "The relationship with CMKX shareholders is a welcome addition to our new family". There is definitely something worth while for Rendall Williams and UCAD that resides in CMKM Diamonds-land.
Longs; re-energize yourself with today's PR, utilizing it as an additional source to enhance your DD. This will in turn allow you to remain focused on the "big picture" with CMKM Diamonds and most importantly provide you with the diligence to remain PATIENT.
Again, all of the above is IMHO.
Good night, and God bless to all!
Peter
(Dxild)
P.S. As UC stated, read all of the PR's carefully; the pieces to this complex puzzle lay within.
================================================================
Re: News - Thursday, September 23, 2004
Aggressive 2004 Drilling Program Commences At Fort À La Corne
================================================================
Victoria, B.C. Thursday, September 23, 2004 - Kensington Resources Ltd.
(the "Company") announces the commencement of the 2004 drilling and sampling program at the Fort à la Corne Diamond Project in
Saskatchewan. The 2004 - 2005 evaluation and exploration program, budgeted at $7.62 million, represents the largest and most aggressive program to date.
The Joint Venture partners have revised their project strategy of focusing on individual kimberlite bodies exclusively. The central thrust of the strategy is now to define higher-grade zones in a number of bodies with the objective of delineating a collective 80-100 million carats in-ground. The objective of the 2004 program is to further advance the understanding of the geology and diamond content of several adjacent, large kimberlites within the central Fort à la Corne cluster.
Robert A. McCallum, President and CEO, stated "This year's program is of significance not only for its size and scope but more importantly for the fact that it will increase the confidence in the diamond distribution and value of the higher grade units within bodies 140 / 141 and 122. As previously announced in on September 7, 2004, the joint venture partners are committed to increasing the tempo of work and will be meeting for two full days at the end of October to formulate a strategic plan to advance the project faster."
The program has been expanded to include 8-10 large diameter drillholes (36-inch or 914.4 mm diameter) and up to 35 coreholes covering 6 different kimberlite bodies and 4 geophysical anomalies. Field operations were initiated on September 4, 2004 and four coreholes have been completed to date on Kimberlite 140/141. A 56-person, full service camp with core handling facility has been erected in the Fort à la Corne forest for the program and includes 11 geoscientists and 27 drilling personnel.
To date, 911.0 metres of drilling has resulted in kimberlite
intersections totaling 432.28 metres (Table 1). Three HQ coreholes(63.5 mm core diameter) were targeted on higher-grade units located in the southern part of the body including the oscillating breccia bed.
In addition to providing geological and diamond content information, the closely-spaced coreholes are pilot holes for large diameter reverse circulation drillholes that will enable further minibulk sampling of the higher grade zones within the southern part of the 140/141 kimberlite. One NQ corehole (47.6 mm core diameter) was drilled on the south extension of the 140/141 kimberlite and intersected 68.15 metres of kimberlite on a gravity anomaly.
Table 1: Summary of 2004 Drillholes to Date
------------------------------------------------------------
Total Kimberlite Additional Short
Drillhole Type Depth Interval Kimberlite Intervals
------------------------------------------------------------
04-140-041 HQ 252.0 107.44 21.84
------------------------------------------------------------
04-140-042 HQ 243.0 138.54 1.25
------------------------------------------------------------
04-140-043 HQ 236.0 118.15 4.85
------------------------------------------------------------
04-140-048 NQ 180.0 68.15 2.32
------------------------------------------------------------
Total 911.0 432.28 30.26
------------------------------------------------------------
Preparations for the large diameter drillholes continue with
installation of surface casing on kimberlites 140/141 and 122, by Central Caissons of Saskatoon. The Encore reverse circulation drilling rig arrived onsite on September 21, 2004. The second Boart-Longyear core rig is expected to arrive on-site by September 25. Both rigs will be actively drilling before the end of the week.
Additional work is currently underway in conjunction to the field activities. A total of 58 samples totaling 464 kg from the north crater of the 122 kimberlite was prepared for microdiamond recovery at the Saskatchewan Research Council. Stones recovered from these samples will be utilized in grade forecasting for specific kimberlite units identified during the 2003 program. A suite of samples was collected from each of kimberlites 122, 148, and 150 for geochemical analysis that will supplement ongoing efforts to determine zonation within these bodies. Representative samples from the 140/141 kimberlite are currently in preparation for indicator mineral chemistry analyses and heavy mineral abundance studies that will contribute to the understanding of diamond source and prospectivity in this comparatively complex body.
In a substantial joint effort, the Company and De Beers Canada are hosting a Media Day at the drilling site for a broad cross-section of people representing government, multi-media, and brokerage firms. The event will include addresses by Robert A. McCallum, President and CEO
of Kensington Resources, Richard Molyneux, President and CEO of DeBeers Canada Corporation, and Andrew Williams, the Senior Project Manager of the Fort à la Corne Project for De Beers Canada. Presentations will be followed by a tour of the drilling sites and minibulk sampling using 36-inch reverse circulation drilling methods.
Brent C. Jellicoe, P.Geo. is the Qualified Person for the Company and has reviewed the technical information herein. All aspects of quality assurance, quality control and sample chain of custody for the Fort à la Corne Joint Venture are managed by De Beers Canada Exploration Inc., the project operator.
Using the expertise of proven management and world-class, experienced technical advisors, Kensington Resources Ltd. is actively involved in confirming the economic potential of this deposit and moving the project forward to a development decision as rapidly as possible. The Fort à la Corne Diamond Project is a joint venture among Kensington Resources Ltd. (42.25%), De Beers Canada Exploration Inc., a wholly
owned subsidiary of De Beers (42.25%), Cameco Corporation (5.5%) and UEM Inc. (carried 10%). The 71+ kimberlite bodies of the Fort à la Corne Field form one of the largest diamondiferous clusters in the world.
For further information, please contact:
Robert A. McCallum, President & CEO
Kensington Resources Ltd.
Suite 306, 1208 Wharf Street
Victoria, British Columbia, CANADA V8W 3B9
Tel: 1-800-514-7859 or (250) 361-1578
Fax: (250) 361-3410
Website: www.kensington-resources.com
E-Mail: rob-mccallum@kensington-resources.com
TRADING SYMBOL: KRT-TSX.V
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
================================================================
Copyright (c) 2004 KENSINGTON RESOURCES LTD. (KRT) All rights
reserved. For more information visit our website at
http://www.kensington-resources.com/ or send
mailto:info@kensington-resources.com
Message sent on Thu Sep 23, 2004 at 1:01:37 PM Pacific Time
================================================================
OT: More on Shore Gold ...
With each new set of results, Shore Gold and their investors beam like a shiny, well polished stone.
Nipawin Journal — Optimism growing as carats rise
BY JORDIE DWYER
Journal Staff
With each new set of results, Shore Gold and their investors beam like a shiny, well polished stone.
Another set of results from the Star Kimblerlite mining project in Fort a la Corne was released last week with some exceptional numbers.
Five batches, all from the deepest part of the mining operation, recovered slightly more than 266 carats from 1,199 dry tonnes. That gives these batches a grade of 22.22 carats per hundred tonne (cpht).
A total of 1,919 stones were taken from those batches with four stones coming in at more than six carats. The largest stone was 14.6 carats.
These results bring up the overall totals to 33 batches complete representing nearly 12,200 dry tonnes of kimberlite with 1,392 carats recovered.
George Read, Shore’s senior vice president of exploration, is delighted with these latest results.
“These include a significant number of large stones and higher grades, particularly in batches 24 and 25,” said Read.
“The frequency of plus one carat stones in the Star Kimberlite will have a highly positive effect on the forthcoming diamond valuation.”
He added that the results to date indicate an average of 15.83 cpht for the kimberlite they are pulling out of the ground. That is well in excess of the number company officials believe would make a mine viable in the region.
Shore Gold also announced last week they have issued more than 11.3 million units at $2.20 per unit. The offering will provide them with another $25 million in equity financing.
Kensington changes team
Kensington Resources announced Friday that it has made some changes to its management and communications teams.
The biggest change is the appointment of Brent Jellicoe, the company’s chief geologist, to the post of Exploration manager. Jellicoe was also recently put on the joint venture management team by Kensington.
Other changes include the addition of Mel Gardner as the manager of investor relations and Ann Gibbs to public and corporate affairs.
Robert McCallum, who was appointed president in June, will now serve as the chief executive officer for Kensington.
McCallum feels all of these appointments will strengthen the company as it tries to grow its Fort a la Corne joint venture.
TSX Venture Exchange offers companies a flexible, two-tiered system. The tiers have minimum listing requirements based on a company's financial performance, resources and stage of development. The industry segments within each tier recognize the different financial and operating needs of companies operating in different industry sectors.
Tier 1 is for senior companies with the most significant resources. Tier 1 issuers have fewer filing requirements.
Tier 2 is for early-stage companies. This is a rapidly growing segment of the venture market in all industry sectors. Most TSX Venture Exchange listed companies are Tier 2 companies.
Tier 3 is a special purpose tier for companies previously quoted on the Canadian Dealing Network.
Companies may apply to move from Tier 2 to Tier 1 once they meet Tier 1 minimum listing requirements. Tier 1 companies will be moved to Tier 2 if they can't maintain Tier 1 requirements.
Company classifications
TSX Venture Exchange classifies Tier 1 and Tier 2 companies by the following industry segments and applies specific requirements to each:
mining
oil and gas
technology or industrial
research and development
real estate or investment.
TSX Venture Exchange divides each industry segment into categories. Click here for an overview of the listing requirements for each segment and category.
Ongoing requirements
Companies must continue to meet minimum standards, called tier maintenance requirements, to remain listed on TSX Venture Exchange. These requirements relate to the company's financial situation, activity and shareholder distribution.
Once your company is listed on TSX Venture Exchange, it becomes a reporting issuer with periodic reporting and disclosure obligations. Reporting issuers must provide shareholders with meaningful information regarding the business, management, operations and financial position of the company.
For more information, please see TSX Venture Policy 3.2 – Filing Requirements and Continuous Disclosure.
Once your company is listed, you must file information about transactions on an ongoing basis, such as private placements, the issuance of stock options and acquisitions. See the TSX Venture Exchange Corporate Finance Manual for complete information on these requirements.
OT: Shore Gold upgraded to Tier 1
2004-09-22 16:26 ET - Miscellaneous
In accordance with TSX Venture Exchange Policy 2.5, the company has met the requirements for a Tier 1 company. Therefore, effective Thursday, Sept. 23, 2004, the company's tier classification will change from Tier 2 to:
Classification: Tier 1
Make sure you set the scale to 100%
... The detail is phenomenal.
Great map No Pro - it sure DOES takes a bit of time for it to download.
The map confirms your point ...
But look at the pink diagonal cross-hatching east of Prince Albert. The entire area (more-or-less) staked by Urban is classified as having diamond potential.
http://www.ir.gov.sk.ca/adx/asp/adxGetMedia.asp?DocID=3568,3539,3538,3385,2936,Documents&MediaID...
The chances are good that potash is there …
The potash is found in the Prairie Formation which lies at depths greater than 1000 metres beneath much of southern Saskatchewan. The potash reserves in Saskatchewan are massive. By conservative estimates, Saskatchewan could supply world demand at current levels for several hundred years.
http://www.ir.gov.sk.ca/Default.aspx?DN=3558,3541,3538,3385,2936,Documents
OT: U can read this!
I cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdgnieg. The phaonmneal pweor of the hmuan mnid. Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer inwaht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht the frist and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and yo!
u can sitll raed it wouthit a porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.
Amzanig huh? yaeh and I awlyas thought slpeling was ipmorantt!
Re: CMKX(2004/09/21)
Summary (approx)
580 trades
21 trades @ $0.0002
559 trades @ $0.0003
1.9 billion more shares traded @ $0.0003 than @ $0.0002
What does this all mean?
Important note about price...
…. with reference to Shore Gold (v.SGF)
For those with long memories, I'd like to take you back to April 1993 when Aber - (TSX- ABZ, NASDAQ-ABER) was trading firmly in the $2.25 - $2.50 range while investors waited for the commencement of the first drill program on Diavik after the initial confirmation that diamondiferous kimberlite had been found. Aber's trading history in that period was remarkably similar to that which Shore is now experiencing and worthy of note. On April 15th of 1993 the stock closed at $2.55 on relatively low volume. On the 16th however volume increased (on no impending news) with the first snippets of institutional interest, to close for the fist time over $3.00 at $3.10 trading over 1 million shares. The following close was at $3.90, with the stock reaching a new plateau at $4.75 - $5.00 by May 6th.
Throughout this period there was no news, only the promise of good things to come combined with an expectant market with newfound institutional interest.
Those here who have watched the junior markets for many years are likely familiar with this phenomenon, and those who are not should take note of the simple reason why this sometimes happens....namely the three dollar margin limit. Once a stock crests three bucks it's purchase can be completed using 50% margin and thus larger positions can be taken by those with a significant appetite. Word is that the recent financing was oversubscribed by something like double, thus indicating a huge appetite for Shore at these levels. Research Capital's heavy institutional purchases at the $2.70 level today bear this out well. Once the $3.00 threshold is cleared, the stage will be set for an increase in volume and price due to the levering effect of the 50% margin limit. Those who want to hold shore at these prices can in fact get a position twice the size (albeit an inherently more risky one) for the same initial cash outlay.
This happens a lot when stocks are in play and Shores results, combined with the obvious interest of the international diamond community set the stage for some interesting days ahead. LOM knows this and most professional traders understand that the distance from $3.00 to $6.00 on a stock with promise can be covered with alarming rapidity.
Cheers per Werner_k
http://www.stockhouse.com/bullboards/viewmessage.asp?stat_num=8411257&all=0&t=0&archived...
Central Saskatchewan = Diamond-Country
Nice +18% for Kensington Resources
Shore had a new high also .. good day for both.