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Janice, how do you know it's not a cross?
If it was a misprint of price, was it also a misprint of volume ... ??
Dunno RBG ... musta missed it. Don't spend my whole day here or reading email like some I know. How's the show going anyway?
Ig
CMKM Diamonds Inc. Announces $10,000,000 Joint Venture Agreement
LAS VEGAS--(BUSINESS WIRE)--Sept. 2, 2004--CMKM Diamonds Inc. (Pink Sheets:CMKX) is pleased to announce that the Company has finalized a joint venture agreement where St. George Metals, Inc. (Pink Sheets:SGGM) will purchase a 5% unencumbered and absolute interest in any and all mineral claims held by CMKM Diamonds, Inc. in consideration for $10,000,000 US Dollars and two hundred billion (200,000,000,000) restricted shares of SGGM. The Company has received a $2,500,000 payment with three additional payments of $2,500,000 anticipated within the next 30 days.
There is no guarantee that further exploration or drilling will produce any economic benefit to the company or the shareholders of the company.
This press release contains "forward-looking" statements as that term is defined by Section 27A of the Securities Act of 1933 (the "Securities Act"), as amended, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. All statements that are included in this press release other than statements of historical fact are "forward-looking" statements. Although management believes that the expectations reflecting in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors could cause actual results to differ materially from the expectations as disclosed herein, including without limitation, in conjunction with these forward-looking statements contained in this press release.
Is this the guy gump?
http://www.esd.mun.ca/~gac/MEDALS/pressLogan.html
Have you ever purchased something by mail order and never received it? What about ordering something that was due in 3 – 5 weeks but hasn’t showed up some 8 weeks later? While you may get upset and place a few phone calls to the distributor, on Wall Street non-delivery is not only standard practice it is acceptable practice. Because of the way Wall Street operates, under a façade of Privacy Rights; you are never informed of the non-delivery. Wall Street will take your money and hand out IOU’s in your account for the shares you purchased. They call it journal entry of “Settlement Failures”.
When I have taken the opportunity to order something on-line, and it hasn’t arrived within a reasonable timeframe I call and search for answers on where my purchased item is. After all, I paid for it and now I expect to receive it. If the purchased item is too long in its delays, I will even cancel the order and ask for a full refund. That is the rights of any person who puts money up for goods sold. When the distributor makes a habit of these delays, I may even contact the Better Business Bureau regarding their business practices. So why is Wall Street exempt from making timely delivery of purchased goods even though the Securities Act itself explicitly requires them to make “prompt” delivery and transfer of ownership of shares?
Recently the Securities and Exchange Commission passed a reform package, Regulation SHO that allows the industry to fail on the delivery of purchased shares as “Normal Operating Practice”. The SEC’s new rule does not contain market-based resolutions to the settlement failures that have abused and manipulated our stocks but instead relies on market integrity and enforcement based threats to deter future manipulation. We have all heard that venue before. Investors can only question why the SEC does not consider settlement a critical component of market integrity. Congress did when they adopted Section 17A of the Securities Act.
Today, the SEC identifies that 4% of all publicly traded securities have abusive settlement failures and at times those failures will exceed the entire public float of companies. As investors, we have made those phone calls we would make to a distributor of goods and asked our Brokers for receipt of the stocks we purchased. Instead of service we get excuses. “The shares show up in your account so you can sell them at any point in time”. Sure they do but they are not real shares until you make good on settlement and I do not want to sell them, I only want to control the illegal dilution that creates an imbalance between supply and demand and hurts my investment. Why can’t my Broker simply get me my shares? When you ask to cancel the trade because it has taken too long without delivery they say “You can’t, we have already sent your cash over and cannot get it back”. Funny, I don’t have them and neither do you but I can’t cancel the trade?
To date the SEC has taken sides with the Industry firms as they show no concern for the ill effects of settlement failure dilution on our investments. The Industry makes tremendous revenues by increasing trade volumes and liquidity and that is what this game is ultimately about. The SEC simply re-states what our brokers tell us when they say; “The shares are in your account and you can sell them when ever you want”. Formal complaints to the SEC and NASD, when clients demand shares, are automatically closed out as no-fault found yet; we still don’t have proof of ownership. The Investors money is gone but the shares are nowhere to be seen.
So how bad is this issue?
In 1999 the SEC went out for public comment on a concept release pertaining to Short Selling. One comment they received came from a Senior Member and Director of Compliance and Operations for an NASD Member firm. This ranking officer claims “market makers and broker/dealers have rigged the game so they can play by a different set of rules than the general public and, to date, this has been protected by the regulatory bodies”. This Officer then proceeds on by Stating “Every day, market pros short sell IPO's, short sell on downticks, and short sell without regard to the availability of certificates, all things done at the expense of individual investors, who do not have the right to do the same.” To this extent, the issues addressed in this memo exist to this very day unchanged. http://www.sec.gov/rules/concept/s72499/loverde1.txt
We can now fast forward nearly 5 years to 2004 where again a Senior Executive from the Industry also commented to the SEC on the issues of trade settlement and the Industry practices. According to Mike Alexander, Executive VO of Charles Schwab, “The NYSE and other SRO’s 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”. And going on to say “We believe that only by holding all market participants directly accountable for making required affirmations will the necessary changes to behavior occur“. http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf
or…
The North American Securities Administrators Association (NASAA) provides insight into the issue of failed settlements by declaring investors as victims of unscrupulous members. In their comment letter to the SEC the NASAA called the naked shorting a “Bear Raid” tactic that should not be allowed to continue and requested the SEC to provide for tough measures in holding the industry responsible. The NASAA went so far as to provide clear direction to the SEC when they stated “If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.” Again the SEC ignored the insight when they drafted Regulation SHO. http://www.sec.gov/rules/proposed/s72303/nasaa010504.htm
The Dilemma:
In the early 1980’s the rules changed regarding how trades would be settled. The SEC and DTCC created a “Book-Entry System” by which physical ownership never exchanged hands, only electronic ownership of shares took place. We became reliant on Computers to keep track of what was going on instead of the physical paper that originated in the market-place. The Markets were addressing efficiency and the paper crisis at the same time
With the reliance on Electronic transfers, the Industry ignored settlement completely. The Computers can keep track of what is necessary so let’s just trade stocks with impunity. The result, more settlement failures and unbalanced books than any one person could imagine. Shareholders were trading in record volumes but what exactly were they trading? The SEC, SRO’s and the Industry knew. We were trading future IOU’s manifested by industry greed and fraud.
The SEC and SRO’s became part of the process as they ignored the cries for help by small business issuers and investors alike. The Short selling concept review in 1999 may have informed them of the problem but by then it was already too late to address so it became best to simply cover it up. The Regulators could not go after the industry because the industry would blame the Regulators for telling them it was acceptable behavior in the first place. A statement that reins true to this day.
So what’s next?
If it were up to Wall Street and the regulators we would all simply dry up and go away. The SEC will proceed on by shutting down non-filing companies and that will begin to erase the unsettled trade burdens.
The SEC has already pulled as many as 40 registrations from shell companies due to non-filing status. The SEC has never addressed exactly what happens to those shareholders whose broker created an unsettled trade into their account but most surmise that the Broker will be able to keep the profits on the sale of that unregistered share. We have asked where these shells reside within that 4% above threshold category but the SEC refuses to address those questions.
The SEC and industry will also continue to beat down the spirits of investors affected by this abuse and the companies they invested in. It is not hard to do as it is generally the middle class or so that invest this way. The SEC figures that a lack of political power and clout will drown out the cries for help. The Regulators start by harassing the company with needless but costly activities and the industry simply imposes ‘Sell–Only” Restrictions on these abused stocks.
Sell-Only restrictions is a process where the Firm will allow their clients to only Sell their holdings but will not allow them to purchase any more. The Firms, as well as the regulators, will tell investors it is for their own best interests but we know better. A spokesman for the NASD told me that the “Sell Only” restriction protects me because the firm is aware that the trade will not settle. The Industry flooded the markets with too many shares so it is in my best interest to not purchase any more. Fact is, the failures were created by the industry and the restriction really protects their liability should they ever have to go in and buy the stock themselves to settle. The Industry members do not want to buy when they have to compete with real shareholders. The regulators approve of this rigging in our capital markets.
So the Industry and the regulators have boxed themselves in a corner and they have a dilemma. Do we continue with the fraud we have taken advantage of these past 20 years or do we change our behavior and become ethical for the sake of future generations? Based on the historical past of late, this greedy and incompetent generation of individuals will merely operate under status quo and hope that people like myself lose steam and drift off.
NEVER! The Middle Class is the working class and the rich and powerful have never figured out the resolve of the working forces. It has always come too easy for them and they do not understand passion and drive.
For the record, I have asked the SEC on several occasions to explain why the industry cannot meet a settlement timeline of 13 days on all trades and they have never provided any rationalizations. It is a SECRET. So much for transparency. The SEC would rather have this fight continue instead of rationalizing their latest law.
http://www.investigatethesec.com/DavePatch29.html
EL C, I'm sure gump means " we'll soon make some money" ... not "it'll reach a $1" .. although it could!
".. We may make a buck yet."
Lets not be silly ...
no matter what you pay, the downside is 100% loss.
August 30, 2004. (FinancialWire) Friday’s story that said omeone appears to have paid “Prospector Alert” a whopping $50,000 to send out faxed “Investors Alert!! GOLD, GOLD, GOLD” touts for Juina Mining (OTC: GEMM) which resulted in irate phone calls to Jody’s Travel set off a firestorm among the online community as investors began to contact FinancialWire enmasse, some including threats.
Interestingly, however, the messages didn’t come from Juina Mining investors but from CNKM Diamonds (OTC: CMKX) investors, which was mentioned only incidentally. The story noted that “the fax says that controlling interest in Juina has been acquired by US Canadian Minerals (OTCBB: UCAD), which it said ‘has been on a tear since June, going from $1.35 to over $5.’ Earlier in August, CMKM Diamonds, which is a favorite of Stock Patrol (www.stockpatrol.com) for its 500 billion shares, a world record number of shares outstanding, said it intends to distribute 95,502,027 of Juina Mining Corp. to its shareholders on October 1 as a dividend.
CMKM Diamonds is a “favorite” of StockPatrol (www.stockpatrol.com), an Investrend Information (www.investrendinformation.com) Investor Resource Center partner.
The story had noted that the 800 number given on the fax to “be removed immediately from the database” was missing a digit, leaving Jody Donnelly at Jodys Travel to field hundreds of calls from people wanting to be off the fax list, which she pointed out is “at my expense,” not to mention the time and aggravation involved.
The fax broadcast said that the company, which trades at $0.028, has a one month target price of $0.50. The company traded at $0.20 in mid-2002 and spiked at $0.16 in late March, 2004.
It didn’t say who the “analyst” is or the location of the report, who paid the $50,000, or the qualifications of the “analyst.”
It concluded, “Donnelly just wants her phone number off the faxes and out of the mix.”
One reader told FinancialWire, “you are breaking the law.”
Another reader identifying himself as Trey Beathard with an email address at UReach.com, told FinancialWire that the story “referenced a woman named Jody Donnelly of ‘Jody's Travel’. The problem is that she does not seem to exist. I, and several CMKX shareholders, need you to either verify the truthfulness of this PR (sic), or issue a retraction immediately. Let's clear up this mystery please, because we won't let this PR (sic) stand without further verification.”
When Beathard was asked wht he meant by not letting this “PR” stand, or if his purported company was in anyway connected to the fax distribution, he did not respond.
Among the newest irate recipients of the fax was Pat Bernhardt of the Divine Peace Lutheran Church in Milwaukee, who asked FinancialWire: “We received a fax regarding Prospector Alert, on stock of GEMM.PK with a bogus number to be removed from the fax list. Do we call the FCC? Who is sending this out?”
Meanwhile, the only ones apparently not hearing of the article were the fax distributors themselves.
Donnelly contacted FinancialWire again to note that the offending fax was apparently sent out again, and now she is receiving a horde of new calls.
Donnelly has not said if she intends to sue, or if she’s notified authorities. The biggest problem with that, of course, is that no one seems to know where the faxes are coming from.
Similarly, no one seems to know where the “CMKX shareholders” are coming from, but there appears to be billions and billions and billions of them. It seems there are at least 100 shares outstanding for every person on earth.
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Shore Gold hit $2.50 ...
Some of it should rub off here.
Who is Roger Glenn? - Zen said it already, but has it sunk in?
THINGS ARE CERTAINLY INTERESTING.
A bit more research for those interested. Being a lawyer and fairly familiar with large law firm structures, I thought it would be helpful to dissect Edwards Angell. It certainly proved even more interesting than I expected.
The reason I did this was because no matter how many times I toy with the facts (or lack of facts), I keep coming back to one question: why did Urban choose a heavy hitter law firm and why specifically Edwards Angell and why specifically Roger Glenn?
Edwards Angell is based primarily out of Boston, but with a strong presence in Providence and New York. They are generally seen as a "Northeastern" law firm however, rather than a "New York" law firm. Which is where it gets interesting. Their New York office houses 44 attorneys. Of the 44 attorneys, Roger is the only partner that truly specializes in corporate securities. In fact, in total there are only about 4 partners in the New York office that I would even say qualify at all as Securities Partners, with the other 3 clearly having focuses in niche markets on securities (foreign acquisitions, insurance companies, and ERISA). In terms of general securities, financings, M&A, and filings, Roger is the MAN in the New York office. This is signficant. You do not have a presence in New York as a large law firm without making sure that your New York office is the absolute BEST that it can be in the securities department. With the proximity to the exchanges, Wall Street and all the financial business in New York, this is truly the "prestige" office. And Roger is THE guy.
Breaking it down further, pay close attention to the publication that he authored in 2003. Its focus is the Sarbanes Oxley Act of 2002. That Act is a set of some of the most complex securities laws ever passed to ensure proper corporate accountability and governance in companies after the Enron and Worldcom scandals, specifically with respect to filings and dealings with the SEC. I hope this is starting to sink in. To be selected to write an authoritative text on interpreting this Act is a testament to the respect, expertise and integrity that Roger possesses in this field. Now think more about our situation. When it comes to proper filings, navigating the complexities of SEC/filings, and doing it all ABOVE BOARD and with maximum ACCOUNTABILITY, Roger is simply one of the best attorneys perhaps in New York to fit this role.
Let me remind you. He is THE man in their New York office. Not one of dozens of partners. THE man. Now many might be thinking (and surely the bashers will be all over this) "maybe Urban did something wrong and needs Roger to bail him out". First, the press releases expressly stated Roger will "help them become fully reporting" which is quite different than than any corporate wrongdoing. Second, Edwards Angell has a "Corporate White Collar Crime" division specifically. Roger is not listed as one of the 16 attorneys with any expertise in that area. My opinion is that it is 99.9% unlikely that Roger would be involved with anything in that area when there are 16 other attorneys that specialize in that area at the firm. I'd also like to wrap into this that Edwards Angell is probably among a handful (probably among the top 10 in the country) of firms that specialize in venture capital and private equity financing. I cannot say how this may work into the equation but what I can say with confidence is that VC people at THIS level would not touch anything without complete and total due diligence and confidence in an emerging company. If in fact there is any additional financing (a secondary? a group willing to fund a move to get an asset base high enough to qualify for NYSE or AMEX listing?), this is THE firm to handle it professionally and with maximum benefit to shareholders and the company.
So let's connect the dots.
Three press releases in late 2003 to early 2004 confirm the buyback of 38 billion shares. Total listed shares as of February were 37 billion shares. 5 months have passed since then. During that time the stock basically traded at .0001. We do not know how many more shares Urban bought back during that time. Suddenly we have Urban switching transfer agents, announcing his intention of becoming fully reporting and hiring the top securities partner in the New York office of one of the nation's most prestigious law firms.
If you were simply looking to perpetuate CMKX and sell shares into the market, why would you do all this, particularly when "fully reporting" would now mean full disclosure on all transactions?
And why in the world if there were any "problems" would you hire the guy that wrote the book on strict corporate procedures and guidelines with respect to filings?
And this is where I ponder heavily ... Why Roger and Edwards Angell? Why would you pick the New York office's top securities guy, the firm's top SEC filings guy to handle your "fully reporting" status? And why would ROGER who assuredly as their top securities guy (particularly the one that PUBLISHED a legal primer on corporate accountability and integrity) EVER take on a pink sheet company when basically his entire livelihood would take on about the largest black eye possible if ANYTHING fraudulent were involved.
I know I'm rambling. Thanks for listening. A few other points. Roger specializes in Mergers & Acquisitions and was the only attorney I found listing "going private transactions" among his specialties. He also was CLEARLY the most recognized partner with respect to filing and becoming a public, reporting company. And being the MAIN guy in the New York office, something became lucidly obvious in thinking all this through .... and keep in mind this is just one attorneys subjective analysis of all this ... Urban has something so big and unique that not only does it require securities legal expertise of the highest level but it specifically requires that it be handled by someone who stands out in the ethics and integrity department as well. In other words, when all is available to the public, there should be an additional "protection" in everything in knowing that it was processed, approved and filed through an attorney with IMPECCABLE credentials. The fact that Roger Glenn published a legal treatise on Corporate Responsibility following the Sarbanes Oxley Act of 2002 is SIGNIFICANT. It essentially means that if Roger blesses what has transpired, it is meeting the HIGHEST standards of corporate responsibility. And if what I believe Urban is bringing to the table through Roger is what it is, this will be CRITICAL.
To recap:
I am 99.9% comfortable with dismissing the notion that Roger was brought on due to anything negative or to "bail out" Urban.
I am 99.9% comfortable with the fact that Roger Glenn in no way would take on a pink sheet company trading at .0001 if he had ANY suspicion of anything unethical.
I am 99.9% comfortable stating that Urban has hired a partner and law firm that represent the highest standards of ethical and responsible securities law practice in the country.
And all this leads me to the conclusion that this is no mere "get me trading on the otc bulletin board situation". No, my (endless) rambling above leads me to believe that this must be a situation of MONUMENTAL significance.
I am sorry this took so long to type. I hope people found it helpful. I have harped on the significance of this firm and man from day one. I felt it important to expand upon why this is the single most important hint to everything that has transpired so far. Good night and please have a wonderful Father's Day to all the dads out there. Hopefully next year for Father's Day, everyone will be considerably better off in life thanks to this investment. Take care.
Z
As always, these are my personal opinions.
Good morning Mr. Cars
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.Good morning Mr. Cars
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..Good morning Mr. Cars
..Good morning Mr. Cars
...Good morning Mr. Cars
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..Good morning Mr. Cars
..Good morning Mr. Cars
.Good morning Mr. Cars
..Good morning Mr. Cars
...Good morning Mr. Cars
Pedro, just a small point - do you mean 40,000,000,000 Shares,
or 40,000,000,000 Billion Shares?
A = Total shares of CIM to be issued as dividend = 40,000,000,000 Billion Shares
StockGate Today - August 25, 2004
August 25, 2004. (FinancialWire) StockGate Today, a newsletter advocating a regulatory crackdown on illegal and manipulative short selling, has charged that the Depository Trust and Clearing Corp. is talking out of two sides of the same mouth over the legality of delays in the settlement process.
StockGate has not only confused most within the industry, due to the roots and tentacles running widely through every aspect of the financial community, it has also cost hundreds of thousands of investors millions of dollars, hundreds of companies their market cap and ability to raise money and embroiled dozens of broker-dealers and market makers such as Bank of America’s (NYSE: BAC) FleetBoston unit, Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), and Olde / H&R Block (NYSE: HRB).
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.
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 August 25 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 roll call 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 certificate plan has been put to a 30-day comment period 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 August 25, 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 August 25 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 impaired 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 market makers, in a web of international intrigue, manipulative short-selling and cross-border actions 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).
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tatrader11 ... the 800BILL shares didn't go anywhere, they're Authorized shares, not OS shares.
Back to 0.0004 again
Buy Sell CMKM DIAMOND INC 1:43:54 PM EDT
CMKX US V + 0.00 0.00 0.0004 0.0001 1,932,727,953
It's taken a long time to go down oilico
... I've been on the bid for a month.
SHORE RECEIVES FURTHER 2.75 MILLION FINANCING COMPLETES PURCHASE OF PROCESS PLANT
SHORE GOLD INC. Saskatoon, Saskatchewan SGF August 20, 2004
Kenneth E. MacNeill, President and Chief Executive Officer of Shore Gold Inc. ("Shore"), is pleased to report that Magma Diamond Resources Ltd. (“Magma”) has exercised its share purchase warrants and acquired an additional 2,500,000 common shares at a price of $1.10 per share for net proceeds of $2,750,000. Shore has used a portion of the proceeds from the warrant exercise to purchase the remaining interest in the modular Dense Media Separation (“DMS”) plant, which is currently processing kimberlite as part of the 25,000 tonne bulk sample. 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. With the exercise of the warrants, Magma now owns 5,000,000 common shares, or 9.41% of the 53,109,936 issued shares.
Shore has purchased the remaining 50 per cent interest in the modular DMS Plant from Bateman Minerals (Pty) Ltd. for $1,692,804. Bateman, a Steinmetz Group company, is one of the world’s foremost providers of process and recovery expertise and equipment to the diamond mining industry. Bateman designed and built the Shore DMS plant. Full ownership of the processing facility provides Shore the flexibility to process additional bulk samples from the Star and other Fort a la Corne kimberlites.
Mr. MacNeill states, “We are very pleased with the vote of confidence shown in Shore and the Star diamond project by such an important world diamond player as the Steinmetz Group.” Addressing the purchase of the plant, Mr. MacNeill added, “Owning 100% of the DMS plant opens all sorts of opportunities for Shore in the Fort a la Corne field.”
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".
For further information: Kenneth E. MacNeill, President & C.E.O., George H. Read, P.Geo., Vice President Exploration, or George Sanders, Vice President Corporate Development at (306) 664-
2202.
-END-
Did SEC Staffers Ridicule NASD For Tougher Naked Short Proposals?
StockGate: Aug 20, 2004 (financialwire.net via COMTEX) -- (FinancialWire) According to Stockgate Today, a new publication from InvestigatetheSEC.com, the PIPE's Report, another publication, exclusively quotes U.S. Securities and Exchange Commission staffers as ridiculing their counterparts at the NASD for trying to interject stronger regulations prohibiting naked short selling.
StockGate has not only confused most within the industry, due to the roots and tentacles running widely through every aspect of the financial community, it has also cost hundreds of thousands of investors millions of dollars, hundreds of companies their market cap and ability to raise money and embroiled dozens of broker-dealers and market makers such as Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), Knight (NITE) and ETrade Group, Inc. (ET).
According to Stockgate Today, the PIPE's Report reported "Market Regulation staffers at the SEC, speaking anonymously, defended Reg SHO's lack of market-based settlement requirements, while admitting the NASD proposals represent a more rigorous approach.
Reg SHO "imposes a penalty, because you have to pre-borrow to execute any further trades and secondly, it may be cause for disciplinary action, but perhaps it is not as strong as our friends at the NASD would like," the publication quoted.
"We think that Reg SHO has an enforcement mechanism that a market-based remedy does not have. But if the NASD thinks they have a better idea, they better come over and talk to us about it."
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 (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. (XRYM) is not possible," the exchange told one such requester.
It's not just U.S. companies such as Whistler Investments (WHIS), Sonoran Energy (OTCBB: SNRN), Celsion Corporation (CLN), and eLinear Inc. (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 August 20 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 (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. (GPXM), Nannaco, Inc. (NNCO), 5G Wireless Communications, Inc. (FGWC), CyberAds, Inc. (CYAD), Provectus Pharmaceuticals, Inc. (PVCT), House of Brussels Chocolates (HBSL), InforMedix, Inc. (IFMX), Tissera, Inc. (TSSR), Americana Publishing, Inc. (APBH), Celsion Corporation (CLN), ChampionLyte Holdings, Inc. (CPLY), Pickups Plus, Inc. (PUPS), China Wireless Communications Inc. (CWLC), CareDecision Corp. (CDED), Titan General Holdings, Inc. (TTGH), IPVoice Communications, Inc. (OTCBB: IPVO), Whistler Investments (WHIS), WARP Technology Holdings, Inc. (WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (NHC), Stratus Services Group, Inc. (OTCBB: SERV), Golden Phoenix Minerals, Inc. (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 (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 (NDAQ), the New York Stock Exchange, Goldman Sachs (GS) and Lehman Brothers (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 (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 August 20, 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 (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 August 20 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 (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 (GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (C); Michael C. Bodson, Managing Director, Morgan Stanley (MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (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 (WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (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 (STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (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 (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. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group, Bank of America's (BAC) Banc of America Securities LLC, Societe Generale's (SCGLF) SG Cowen Securities Corp. vFinance, Inc. (VFIN), Knight Trading Group, Inc. (NITE), A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), and ETrade Group, Inc. (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. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group and vFinance, Inc. (VFIN). A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), Knight (NITE) and ETrade Group, Inc. (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. (ADVR), AdZone Research, Inc. (ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (ATSC), Federal Agricultural Mortgage / Farmer Mac (AGM) Allied Capital (ALD), American Motorcycle (OTC: AMCYV), American International Industries (AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (ATSC) Bluebook International (BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (BIFT), Biocurex (BOCX). Broadleaf Capital Partners, Inc. (BDLF), Chattem, Inc. (CHTT), Critical Home Care (CCLH), Composite Holdings (COHIA), CyberDigital, Inc. (CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (DCEL), Eagle Tech Communications (EATC), Edgetech Services (EDGH);
Also, Endovasc Ltd. (EVSC), Enviro-Energy Corporation (ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (ESWW), EPIXTAR Corp. (EPXR), eResearchTechnologies, Inc. (ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (FRE), FreeStar Technologies (OTCBB: FSRCE), Front Porch Digital,
Inc. (FPDI), Geotec Thermal Generators, Inc. (GETC), Genesis Intermedia (GENI), GeneMax Corp. (GMXX), Global Explorations Inc (GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (HPON), H-Quotient, Inc., (HQNT), Hyperdynamics Corp. (HYPD), International Biochem (IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (IBCS), InternetStudios, Inc. (ISTO), ITIS Holdings (ITHH), Investco Corp. (IVCO), Lair Holdings (LAIR), Lifeline BioTechnologies Inc. (LBTT), Life Energy & Technology (LETH), MBIA (MBI);
Also, MegaMania Interactive (MNIA), MetaSource Group, Inc. (MTSR),Midastrade.com (MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (NPCT), Nutra Pharmaceutical (NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (NVGV), Orbit E-Commerce, Inc. (OECI), Pitts & Spitts (OTC: PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (PYST),Petrogen Corp. (PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (PDVN), PrimeHoldings.com, Inc. (PRIM), Phlo Corporation (PHLC), Resourcing Solutions (RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (SDNA);
Also, Sionix Corp. (SINX), Sonoran Energy (OTCBB: SNRN), Starmax Technologies (SMXIF), Storage Suites America (SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (SPRI), Technology Logistics (TLOS), Swiss Medica, Inc. (SWME), Ten Stix, Inc. (TNTI), Tidelands Oil (TIDE), Titan Construction (TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (VRA), Viragen International (VGNI), Vista Continental Corporation, (VICC), Viva International (VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (WIZD), WorldTradeShow.com (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 (AAFGQ), Amanda Co Inc (AMNA), Antra Holdings (RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AVN), Bionutrics Inc (BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (BUTL),Calypte Biomedical Corp (OTCBB: CYPT), Chemtrak Inc/DE (CMTR), Clicknsettle Com Inc (CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (CLWB), Dental Medical Diagnostic Systems Inc (DMDS), Detour Media Group Inc (DTRM),
Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (DISS), International Inc (DYNX), Endovasc Ltd Inc (EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (FRBW), Greystone Digital Technology Inc (GSTN), Havana Republic Inc/FL (HVNR), Henley Healthcare Inc (HENL), Hollywood Media Corp (HOLL), Ibiz Technology Corp (IBZT), Diagnostic Systems Inc/FL (IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (RDOC),
Also, Interferon Sciences Inc (IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (THMZ), Medisys Technologies Inc (SCEP), Milestone Scientific Inc/NJ (MS), Nevada Manhattan Group Inc (NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OSYM), Pacific Systems Control Technology Inc (PFSY), Professional Transportation Group Ltd Inc (TRUC), Rnethealth Inc (RNTT),
Also, Sand Technology Inc (SNDT), Sedona Corp (SDNA), Silverado Foods Inc (SVFO), Stockgroup Information Systems (SWEB) Surgilight Inc (SRGL), Tasty Fries Inc (TFRY), Tech Laboratories Inc (TCHL), Teltran International Group Ltd (TLTG), Titan Motorcycle Co of America Inc (TMOTQ), Trans Energy Inc (TSRG), Motorcycle Co (UMCC), Universal Communication Systems Inc (UCSY), Medical Systems Inc (UMSI), Vianet Technologies Inc (VNTK),Viragen Inc (VRA), Webcatalyst Inc (WBCL), Worldwide Wireless Networks Inc (WWWNQ), and ZAP (ZAPZ).
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How is it possible for a stock price to remain unchanged under ceaseless buying and selling?
STOCKGATE - Timeline to Financial Terrorism –
August 18, 2004
Compiled by Dave Patch
The financial terrorism of this issue is not only caustic to the small issuer and retail investor but has been well documented as a process to finance criminal elements. The paper trail of Regulatory delays in correcting this problem over the years is irrefutable. Worse still is the SEC’s arrogance and incompetence in fighting for the rights of the investor. In 1996 the SEC accused the NASD of making enforcement and regulatory decisions based on the pressures of the member firms. They claimed that the NASD would never emerge as an effective agency until they could divorce themselves from this conflict of interest. Ironically it would appear, based on this timeline that it is not the NASD that has succumb to member pressures recently but the SEC itself. The political pressures of maintaining the financial revenues of the Industry have been placed above the financial security of the investors of this nation as the SEC wavered.
This is financial terrorism and the terrorist are our own Government Agency. The Securities and Exchange Commission has failed to identify exactly why the trades cannot settle in compliance to the Securities Act of 1934 but instead make excuses and claim that it is complicated. Certainly the NASD, which regulates the most abused micro-cap stocks, did not think it was so complicated when they submitted their reform package to the SEC in March of 2004. The NASD could not understand what rationalization was needed to have trades fail settlement beyond a allowable 2 week failure period. The SEC apparently has their own reasons but think it unnecessary to inform anybody in regulation of those fighting for protection.
For the sake of the Future of our Markets, the SEC needs to be held accountable for the financial terrorism they impose on our nation.
Issue starts:
1985 – Securities investigators were tracking the “Mob on Wall Street” placing their sites on Alphonse Malangone and Vincent Romano. The Investigators focused on Broker-Dealer Hanover Sterling controlled by Malangone through Alan Longo.
1995 – Hanover Sterling shut down and Clearing Firm Adler Coleman went insolvent due to their insufficient capital to cover unsettled trades associated with illegal shorting.
1996 – SEC conducts study of NASD and fines the NASD for conflicts between member pressures and the enforcement of fraud to protect investors. SEC claims that NASD must change their conflicted practices if they choose to be an effective regulatory agency. http://www.sec.gov/litigation/investreport/nd21a-report.txt
1996 – 2000 SEC and FBI Investigate Organized crime infiltration into US markets through Canadian brokerage firm Pacific International. Claims criminal elements laundering money and stock manipulation through naked shorting is exposed. http://www.rgm.com/articles/cornucopiaofcrooks.html
1999 – SEC has an open comment period on Short Selling and receives more than 2000 comment letters addressing the abuses of Naked Shorting. No actions or reforms came from those comment letters. http://www.sec.gov/rules/concept/s72499summary.htm
September 2000 – SEC speaks in front of Congress to discuss Organized Crime infiltration into Securities Markets. They speak heavily about the Micro-Caps as the easiest to infiltrate. (http://www.sec.gov/news/testimony/ts142000.htm)
September 2000 – National Association of Securities Dealers (NASD) meets with Congress to discuss Organized Crime in the Markets and also discusses the Micro-Caps as the easiest to infiltrate. The NASD being an SRO consisting of the member bodies of Wall Street. (http://www.nasdr.com/1420/goldsmith_04.asp)
Dec 2000 – NASD files Enforcement action against Broker-Dealer Fiero Brothers for their participation in “Bear Raids” and illegal shorting of small cap securities. The Fiero Brothers worked directly with Hanover Sterling and was a major contributor to the demise of Hanover Sterling and Adler Colemen. This is the first enforcement action associated with stock manipulation via shorting practices and linked Organized Crime to the practice.
January 2001 NASD bars Fiero Brothers from Industry and fines them $1 Million for Stock Manipulation, Illegal Shorting, and Extortion. No reforms came from this action. (http://www.nasdr.com/news/pr2001/ne_section01_003.html)
2001- Allegations of illegal short selling abuses in small companies begins to grow in the markets.
October 2001 – NASDAQ Company Sedona Corporation files complaint with SEC regarding short selling abuses by Rhino Advisors. SEC agrees to investigate matter.
October 2001 NASD submits a reform bill to SEC for approval to “Close a Loophole” in offshore shorting practices. Request changes to Affirmative Determination requirements to address non-member shorting abuses (Offshore shorting). http://www.nasdr.com/pdf-text/rf01_85.pdf
2002 – Naked shorting campaign heats up with more than 100 publicly traded companies going public with their problems. Many try to take action by moving to “Certificate Only” trading and to exit the Electronic Settlement System of the Depository Trust (DTC).
June 2002 – Genemax (OTCBB:GMXX) is the first of 6 Companies that had successfully exited the DTC Trade settlement system for “Certificate Only” Trading. Shareholder failures in receiving Certificates were evidence of counterfeit shares manipulating the Markets. SEC and NASD failed to take any actions for correction.
August 2002 – Operation Bermuda Short – Joint FBI Royal Canadian Mounted Police (RCMP) sting operation concludes with nearly 60 arrests of offshore bankers and brokers associated with stock manipulation. Sting Operation took 3 years to complete. The manipulation of our Markets continued while this sting was in play. (http://www.globeandmail.com/servlet/ArticleNews/business/RTGAM/20020818/818bcbc/Business/businessBN/... )
(http://www.globeandmail.com/servlet/ArticleNews/business/RTGAM/20020816/wxmain/Business/businessBN/b... )
October 2002 – NASD speaks to Congress about Anti-Money Laundering initiatives. Throughout this time, the NASD was fully aware of the trade settlement failures and the public outcry from Companies violated by the “Naked Short” abuses. http://www.nasdr.com/1420/walter_01.asp
December 2002 – Paul Lemmon pleads guilty in Operation Bermuda Shorts. Given light sentence for disclosing mechanisms to fraud and names. No net actions to date have been taken by the FBI or our Securities regulators based on the evidence provided by Mr. Lemmon (http://www.rgm.com/articles/tk2.html )
January 2003 – DTC seeks support of SEC to stop all Companies from exiting the electronic trading system for “Certificate Only” trading practices. Evidence to date by those that did exit was a disclosure of the settlement failures within the DTC settlement process. It became better to cover up the problem than expose it at the present time. In June the SEC supported the DTC’s request to stop future exiting from the system. Cite “potential” of Counterfeit paper and lost paper as a rationale while accepting the electronic counterfeit shares to remain in place. (http://www.dtcc.com/PressRoom/2003/nakedshorts.html)
(http://www.sec.gov/rules/sro/34-47978.htm)
February 2003 – SEC fines Rhino Advisors $1 Million for stock manipulation and short selling abuses to Sedona Corp. Stock. What will later be learned is that the SEC had evidence in hand regarding the bribery of US and offshore brokers to manipulate this security. No actions against a broker have ever taken place. No attempts at restitution to shareholders taken and no demand for unsettled trades to be settled by brokerage firms. Sedona’s stock remains oversold/manipulated to this day. (http://www.sec.gov/news/press/2003-26.htm )
June 2003 – SEC initiates first action in Genesisintermedia case. MJK Clearing house becomes victim to stock loaning scandal and is placed into bankruptcy protection and receivership. The receiver's suit alleges a wide-ranging and sophisticated securities loan and market manipulation schemes financed by the Toronto branch of Deutsche Bank. http://www.rgm.com/articles/sec.html
October 2003 – SEC proposed regulation SHO to address shorting issues including “Naked Shorting”. SEC admits in background to proposal that “naked shorting” and settlement failures exceed the entire float of a company. (http://www.sec.gov/rules/proposed/34-48709.htm ). Comments to this reform include a letter from the North American Securities Administrators Association (NASAA) identifying that small companies and investors have been victimized by the short selling abuses. (http://www.nasaa.org/nasaa/Files/File_Uploads/Short%20Sales%20Comment.37990-38287.pdf)
October 2003 – Forbes article identifies “naked shorting” as “Wall Street’s Next Nightmare”. Coverage of issue remains sparse. (http://www.forbes.com/forbes/2003/1013/066.html)
November 2003 – SEC approves 2001 request by NASD to close offshore short selling loophole. Seeks accelerated approval of reforms. Accelerate request for approval in contradiction to 2 year hiatus on approval. http://www.sec.gov/news/digest/dig112003.txt
December 2003 – Department of Justice (DOJ) arrest Andreas Badian (Rhino Advisors) under criminal indictment for Stock manipulation. Thomas Badian fled country just prior to arrest. DOJ provided audio tapes by SEC with Badian bribing US Brokers to “Collapse” stock. Like the SEC (Feb. 2003) the DOJ leaves the Brokers untouched in the criminal actions.
January 2004 – NASAA provides public comment to SEC on Regulation SHO and addresses industry abuses and “Bear raids” taking place in the markets. Claims investors are being victimized and that the DTCC stock borrow program has issues. Requests that the SEC seriously consider actions to stop the abusive behavior and claims that SHO does not go far enough. (http://www.sec.gov/rules/proposed/s72303/nasaa010504.htm)
January 2004 – Senate Banking Committee council member identifies that a joint SEC/NASD task force is looking into the “Naked Shorting” abuses including the investigation into specific companies. The Senate Banking Committee was never to be heard from again on this matter as they folded on the issue in this highly political election year.
January 2004 – NASD notifies members of the new rule change that was approved in November of 2003. Rule change to plug ‘loophole” used to manipulate our stock markets. Time table for incorporation is slated for February 20, 2004. Nearly 2.5 years from the original proposal to close loophole. (http://www.nasdr.com/pdf-text/0403ntm.txt)
February 18, 2004 – NASD pushed out proposed rule change to April 1, 2004. Members request extension to closing “loophole” because February date was too inconvenient for them. 2000 (http://www.nasdr.com/filings/rf04_31.asp)
March 2004 – NASD submits proposed short selling settlement package to SEC for release to public comment. NASD proposal addresses once and for all the abusive nature of settlement failures and forces an industry correction. SEC’s Regulation SHO still in writing at this time.
March 2004 – Universal Express sues the SEC for harassment regarding the SEC’s continued unwillingness to address the naked shorting issues on their stock. Universal express claims that instead of assisting in the resolution to the abusive trading that the SEC became vindictive and came after the company to shut them up.
March 2004 – Berlin Stock Exchange begins listing of nearly 800 US Publicly traded companies. Companies are unaware of this listing but many notice a downward spike in their stock prices that coincide with the listings. The belief is that the industry is using naked shorting to an arbitrage in Germany will be used to circumvent the new NASD 3370 Rule effective April 1. Berlin Stockgate begins.
May 2004 – SEC Division of Market Regulation admits that the SEC is working with the Federal Government tracking the illegal shorting and manipulation to terrorism. This same Division of the SEC claims that the SEC cannot force the industry to settle all the unsettled positions because “There are more unsettled shares than shares to settle with”. The SEC is calculating mitigation of losses and is willing to throw aside the Congressional mandates of investor protection if necessary. It is the Industry responsible for the buy-in to settle these trades and the industry has failed to set aside enough capital to cover a forced buy-in (RE: 1995 Adler Coleman and 2002 MJK Clearing Bankruptcies).
May 2004 – Nanopierce Technologies files first lawsuit against the DTCC/NSCC for stock manipulation. Nanopierce claims that the stock borrow program orchestrated a culture of abusive trading and the creation of counterfeit shares to manipulate the stock.
June 2004 – SEC and NASD travel to Berlin to discuss exchange trading regulations. Hundreds of Companies have complained with only partial success in acquiring de-listing. No word on the result of this meeting. The broker responsible for the listings of US companies claims the SEC and NASD left satisfied.
June 2004 – SEC suspends registration of 26 Shell Companies for failing to file reports with the SEC. Trading suspension, without forcing equilibrium of trade settlements allows the Industry to eliminate the liability of settlement failures on these shell companies. many believe these companies are part of the 4% abused that the SEC identified in Regulation SHO and that by suspending these registrations, now after years of failed filings, is an attempt to mitigate member liabilities.
June 2004 – SEC proposes rule change to restrict small issuers from self-help protection to illegal shorting practices. SEC claims yet to be released Regulation SHO will be cure-all to naked shorting and that small issuers must be restricted from placing their shares in “Custody Only” status. (http://www.sec.gov/rules/proposed/34-49804.htm)
June 2004 – Charles Schwab Executive VP Michael Alexander, in a public comment to the SEC regarding concept release on reducing trade settlements to T+1 or T+0, identified that the Industry has a “Behavioral Issue” with stock settlements. Mr. Alexander identifies that changes will not work until this Industry Behavioral problem is addressed. Naked shorting manipulation feeds off this same behavioral issue as the industry ignores their responsibility to locate and deliver shares for settlement. (http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf)
June 2004 – SEC releases watered down Regulation SHO creating thresholds of acceptable abuse. SEC release fails to enforce mandatory buy-ins on extended failures and fails to address the settlement problems in the industry today. (http://www.sec.gov/rules/final/34-50103.htm)
June 2004 – House Financial Services staffer made statements that the recently released Regulation SHO did not address all of the issues regarding naked shorting and stock settlements. “I indicated to your colleague that I was not denying that there were some serious problems and that the SEC had not yet addressed them.”
July 2004 – NASD expels Ryan and Co. for failure to present documentation as requested regarding short sale transactions for hedge funds. Offshore Hedge Funds being primary targets for the naked shorting manipulation of stocks and present settlement failures the SEC claims are excessive on the books today.
July 2004 – NASD sends notice to members on the allowances for arbitrage exemptions in trade settlement. Notice comes in direct response to Berlin Stockgate issue. NASD re-acclimates members with specific guidelines should they decide to use arbitrage exemptions on trades.
August 2004 – Allegations of SEC asking NASD to rescind their March 2004 proposal for short sale settlements are confirmed. SEC has identified that all Markets must be in compliance with their Regulation SHO, problems and all, and that the harsher restrictions requested by the NASD would not be in compliance with their recent package. The SEC has succumbed to Member pressure to allow settlement failures to be a normal part of the markets.
August 2004 – SEC again suspends registrations on additional 14 companies for failing to file with the SEC. The SEC again failed to force the industry to set the stock back to equilibrium – no settlement failures – prior to taking action allowing the industry to mitigate liability.
[ To be continued - August 18, 2004 ]
Diamond prospects improving. The outlook for Shore Gold is getting brighter the further down the tunnel they go.
BY JORDIE DWYER
Journal Staff
Nipawin Journal — Diamond prospects improving
BY JORDIE DWYER
Journal Staff
The outlook for Shore Gold is getting brighter the further down the tunnel they go.
Last Thursday, the company released its fourth set of results from its bulk sample program in Fort a la Corne and the figures continue to show promise.
A further six batches - bringing the total to 22 out of around 100 - found another 1,463 commercial sized stones (larger than 1.18 millimetres) weighing a total of 223.6 carats as well as 163 smaller stones (between 1.17 and 0.85 mm) with a weight of 2.6 carats.
The more impressive number though is the average grade for the six batches. At 18.01 carats per hundred tonnes, it has given rise to renewed optimism at Shore Gold.
"The samples processed to date have produced a significant number of large diamonds," said George Read, Sr. vice-president of exploration for Shore.
"The abundance of large, quality stones will have a highly positive effect on the economics of the project."
More drilling
A five company joint venture announced earlier this month that it will soon begin drilling on a claim that is near the Fort a la Corne region that has been proven to have significant diamonds.
The joint venture includes Shane Resources (TSXV: SEIH), United Carina Resources (TSXV: UCA) and Consolidated Pine Channel Gold (TSXV: KPG) - all from Saskatoon - along with Las Vegas-based CMKM Diamonds (OTCBB: CMKM) and U.S. Canadian Minerals (OTCBB: UCAD).
The claim is located about 12 kilometres northwest of the site currently producing diamonds for Shore Gold.
The joint venture didn't release any information regarding the drilling program or how much it is planning to spend.
I'll tell you this tz ...
.. there's one heck of a pile being made in commissions.
Killerprincess, if you’re new to this and don’t understand the role of bashers the following link of a letter to the SEC will describe the whole picture to you. In short, they’re paid to induce selling and dissuade buying. None of them will admit it of course.
The letter is a bit long, but it’s all there and well worth the read.
http://www.sec.gov/rules/proposed/s72303/decosta122203.htm
Utter confusion reigns amongst regulators.
StockGate: NASD and SEC Seemingly At Odds Over NASD's Short Selling Proposal
Aug 9, 2004 (financialwire.net via COMTEX) -- (FinancialWire) Dave Patch, the founder of InvestigatetheSEC.com, has become increasingly frustrated at what appears to be a growing state of confusion between the U.S. Securities and Exchange Commission and the NASD over the status of the NASD's proposals to squelch illegal naked short selling.
StockGate has not only confused most within the industry, due to the roots and tentacles running widely through every aspect of the financial community, it has also cost hundreds of thousands of investors millions of dollars, hundreds of companies their market cap and ability to raise money and embroiled dozens of broker-dealers and market makers such as Bank of America's (BAC) Banc of America Securities LLC, A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), and Deutsche Bank AG (DB).
Patch had noted that the NASD has submitted a reform package to the SEC that clarifies the prompt trade settlement issue that detractors of Regulation SHO believe the SEC overlooked or ignored altogether. The proposal, at http://www.nasdr.com/pdf-text/rf04_44.pdf, has been before the SEC for four months with no indication by either as to the status, if any.
Interestingly, the proposal seems to have been presented at the SEC's behest, since while it was still considering Regulation SHO, the SEC had seemed to throw the whole confusing StockGate problem into the provinces of their SROs.
For several weeks, Patch said he attempted to contact the SEC Division of Market Regulation to find out the reasons for the delay, but got no response.
Then he said he tried to call Stephanie Dumont, who was listed as the contact, but after leaving a half dozen phone messages without response, he tried John Gannon of Investor Education. Patch said that Gannon was also inexplicably "snubbed" by his colleague. She told Gannon that she would return Patch's call only after she had "received permission" to do so.
Patch said the NASD's proposal, unlike the SEC's recent reform change, mandates guaranteed settlement of trades after a specifically defined time limit of failure.
"There is no threshold limit to allow settlement failures on any security to accrue until it reaches inappropriate levels and then force settlement, it starts at ground zero. Settlement is a mandatory part of trading. The NASD proposal also states that costs cannot be a factor in the decision to achieve settlement as it is today.
"Today our Brokerage firms, for the argument of liquidity, will take a buy order on a security even though they do not have the shares to sell you nor is there a market as a seller at that stated value. The industry wants your commission. The Industry will only buy in shares to settle on the trade they executed when and if it becomes profitable to them. In other words, they will create temporary counterfeit shares and replace them with real ones when the cost of the real ones becomes beneficial. If it never does, the counterfeit share remains in the system. Sounds like a rigged game," he stated.
Patch finally sent an email to various officials at the NASD, asking why they had ignored requests for the status, and why the SEC claimed to him that the proposal was no longer active because the NASD had "rescinded it."
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 provided copies of his email to Robert R. Glauber, NASD CEO; Elisse B. Walter, Executive Vice President, Regulatory Policy & Programs, Stephen Luparello, Executive Vice President, Market Regulation & US Exchange Solutions; Douglas Shulman, President, Markets, Services and Information; Mary L. Schapiro, NASD Vice Chairman and President, Regulatory Policy & Oversight; and Barry R. Goldsmith, Executive Vice President, Enforcement.
Menchel chided Patch for his "singularity of dimension," and stated that he understood Patch's frustrations that he said "may be understandable given your own economic interests in this matter."
Patch disclosed to FinancialWire that his losses have been in the high five figures, but says that is paltry compared to the economic interests of broker members of the NASD. He also believes that it is his right and the right of those participating in his cause, under the First Amendment to the U.S. Constitution, "to petition the Government for a redress of grievances."
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."
Menchel stated that federal securities laws require that "every rulemaking proposal filed by the NASD takes place in the sunshine. Proposals are published for notice and comment and the SEC is always interested in our responses to comments. Sometimes we stay with the existing proposal and sometimes we amend proposals in the face of comments. Sometimes we amend our proposals based on conversations with SEC staff or because of our own continued thinking on the subject matter.
"In addition, over 90% of the time we provide the industry and the public a comment period on proposals, not required by statute or our rules, by issuing a Notice to Members prior to any filing with the SEC. All that said, we do not provide the public or the industry with moment-to-moment updates on our actions and thinking during our time of consultation and deliberation on matters. It is not simply a matter of not being required to do so; it is predicated on the need for a regulator to take time to conduct its own thinking and make its own responsible determinations prior to publicly broadcasting its intent with regard to rulemaking."
Patch responded that Rule 3370 was on file for approval to close a "loophole" in Affirmative Determination for over two years, a situation he called an "atrocity." He said that the public "can not afford to wait another two and one-half years for the SEC to consider NASD's latest proposal."
He pointed out that the regulators had "forgotten" about the Affirmative Determination proposal "until the people and the issuers raised (heck) with the issue. Then it suddenly reappeared. It should not have taken that effort." Likewise, Patch noted, the SEC "was forced to address the issue only after companies began to exit the DTC and began suing broker-dealers."
Finally, said Patch, "SHO was a bust and I only hope the NASD has the ethics and courage to stick to their own proposal which brings the spirit of the Securities Act back in order."
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 (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. (XRYM) is not possible," the exchange told one such requester.
It's not just U.S. companies such as Whistler Investments (WHIS), Sonoran Energy (SNRN), Celsion Corporation (CLN), and eLinear Inc. (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 August 9 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 (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. (GPXM), Nannaco, Inc. (NNCO), 5G Wireless Communications, Inc. (FGWC), CyberAds, Inc. (CYAD), Provectus Pharmaceuticals, Inc. (PVCT), House of Brussels Chocolates (HBSL), InforMedix, Inc. (IFMX), Tissera, Inc. (TSSR), Americana Publishing, Inc. (APBH), Celsion Corporation (CLN), ChampionLyte Holdings, Inc. (CPLY), Pickups Plus, Inc. (PUPS), China Wireless Communications Inc. (CWLC), CareDecision Corp. (CDED), Titan General Holdings, Inc. (TTGH), IPVoice Communications, Inc. (OTCBB: IPVO), Whistler Investments (WHIS), WARP Technology Holdings, Inc. (WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (NHC), Stratus Services Group, Inc. (OTCBB: SERV), Golden Phoenix Minerals, Inc. (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 (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 (NDAQ), the New York Stock Exchange, Goldman Sachs (GS) and Lehman Brothers (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 (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 August 9, 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 (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 August 9 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 (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 (GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (C); Michael C. Bodson, Managing Director, Morgan Stanley (MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (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 (WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (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 (STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (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 (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. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group, Bank of America's (BAC) Banc of America Securities LLC, Societe Generale's (SCGLF) SG Cowen Securities Corp. vFinance, Inc. (VFIN), Knight Trading Group, Inc. (NITE), A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), and ETrade Group, Inc. (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. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group and vFinance, Inc. (VFIN). A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), Knight (NITE) and ETrade Group, Inc. (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. (ADVR), AdZone Research, Inc. (ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (ATSC), Federal Agricultural Mortgage / Farmer Mac (AGM) Allied Capital (ALD), American Motorcycle (OTC: AMCYV), American International Industries (AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (ATSC) Bluebook International (BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (BIFT), Biocurex (BOCX). Broadleaf Capital Partners, Inc. (BDLF), Chattem, Inc. (CHTT), Critical Home Care (CCLH), Composite Holdings (COHIA), CyberDigital, Inc. (CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (DCEL), Eagle Tech Communications (EATC), Edgetech Services (EDGH);
Also, Endovasc Ltd. (EVSC), Enviro-Energy Corporation (ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (ESWW), EPIXTAR Corp. (EPXR), eResearchTechnologies, Inc. (ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (FRE), FreeStar Technologies (OTCBB: FSRCE), Front Porch Digital,
Inc. (FPDI), Geotec Thermal Generators, Inc. (GETC), Genesis Intermedia (GENI), GeneMax Corp. (GMXX), Global Explorations Inc (GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (HPON), H-Quotient, Inc., (HQNT), Hyperdynamics Corp. (HYPD), International Biochem (IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (IBCS), InternetStudios, Inc. (ISTO), ITIS Holdings (ITHH), Investco Corp. (IVCO), Lair Holdings (LAIR), Lifeline BioTechnologies Inc. (LBTT), Life Energy & Technology (LETH), MBIA (MBI);
Also, MegaMania Interactive (MNIA), MetaSource Group, Inc. (MTSR),Midastrade.com (MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (NPCT), Nutra Pharmaceutical (NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (NVGV), Orbit E-Commerce, Inc. (OECI), Pitts & Spitts (OTC: PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (PYST),Petrogen Corp. (PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (PDVN), PrimeHoldings.com, Inc. (PRIM), Phlo Corporation (PHLC), Resourcing Solutions (RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (SDNA);
Also, Sionix Corp. (SINX), Sonoran Energy (SNRN), Starmax Technologies (SMXIF), Storage Suites America (SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (SPRI), Technology Logistics (TLOS), Swiss Medica, Inc. (SWME), Ten Stix, Inc. (TNTI), Tidelands Oil (TIDE), Titan Construction (TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (VRA), Viragen International (VGNI), Vista Continental Corporation, (VICC), Viva International (VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (WIZD), WorldTradeShow.com (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 (AAFGQ), Amanda Co Inc (AMNA), Antra Holdings (RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AVN), Bionutrics Inc (BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (BUTL),Calypte Biomedical Corp (CYPT), Chemtrak Inc/DE (CMTR), Clicknsettle Com Inc (CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (CLWB), Dental Medical Diagnostic Systems Inc (DMDS), Detour Media Group Inc (DTRM),
Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (DISS), International Inc (DYNX), Endovasc Ltd Inc (EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (FRBW), Greystone Digital Technology Inc (GSTN), Havana Republic Inc/FL (HVNR), Henley Healthcare Inc (HENL), Hollywood Media Corp (HOLL), Ibiz Technology Corp (IBZT), Diagnostic Systems Inc/FL (IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (RDOC),
Also, Interferon Sciences Inc (IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (THMZ), Medisys Technologies Inc (SCEP), Milestone Scientific Inc/NJ (MS), Nevada Manhattan Group Inc (NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OSYM), Pacific Systems Control Technology Inc (PFSY), Professional Transportation Group Ltd Inc (TRUC), Rnethealth Inc (RNTT),
Also, Sand Technology Inc (SNDT), Sedona Corp (SDNA), Silverado Foods Inc (SVFO), Stockgroup Information Systems (SWEB) Surgilight Inc (SRGL), Tasty Fries Inc (TFRY), Tech Laboratories Inc (TCHL), Teltran International Group Ltd (TLTG), Titan Motorcycle Co of America Inc (TMOTQ), Trans Energy Inc (TSRG), Motorcycle Co (UMCC), Universal Communication Systems Inc (UCSY), Medical Systems Inc (UMSI), Vianet Technologies Inc (VNTK),Viragen Inc (VRA), Webcatalyst Inc (WBCL), Worldwide Wireless Networks Inc (WWWNQ), and ZAP (ZAPZ).
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What more do we need to know about SEC rule 15c3-3 …
… and for the SEC's failure to enforce it – what’s in store for October? ... another illusion? .. another sham?
18-OCT-2004 New York USD $1250
NY Institute of Finance
9:00am - 4:30pm Mon
SEC rule 15c3-3 addresses:
- Buy-in of short security differences
- Delivery of securities
- Completion of sell orders
http://www.ftknowledge.com/courses/brochures/aatx_2006.pdf
Investors must become educated as to the nature of “naked short selling” and demand the registration and home delivery of their shares … it’s the key to ending this fraudulent practice until the Stockgate mess is cleaned up.
Existing SEC Customer Protection Rule 15c3-3, when enforced, provides customer protection by preventing broker-dealers from using customers' securities and other assets to finance firms' proprietary activities. Why is it not being enforced … is it too lucrative? Investors must demand their share certificates to force the SEC to enforce their own rule.
The Customer Protection Rule is the ONLY WAY to defend against “naked shorting” securities fraud … but broker-dealers choose to ignore this rule most of the time, and the regulators turn the blind eye.
Rule 15c3-3 applies to OTC:BB and to Pink Sheet equities. It mandates that any “failure to receive” of certificated shares that were purchased are to be bought-in by the purchasing brokerage firm on the 10th business day after the settlement date. It’s up to the purchaser of the shares, the Investor to start the process rolling …
The law also states that the selling firm in the transaction is to buy-in their client who is doing the selling if he hasn’t produced the certificate within 30 days of settlement.
The law further requires brokerage firms to buy-in “failures to receive” and to deliver the shares within 45 days of filing quarterly reports that noted these “Fails”.
The rule exists …. The SEC’s job is to enforce it. Take possession of your certificates to force their hand.
And, let your voice be heard … http://www.investigatethesec.com/
Following not only the letter but the spirit of the law.
On April 22, 2004 Chairman Donaldson of The Securities and Exchange Commission spoke to the Investment Council Association of America. As the Chairman delved into a speech about the important role the ICAA had on the American investors as the Markets were continually being changed he asked for their support. In doing so the Chairman had this to say: "It means that leaders not only live up to the letter of the law, but also internalize and advocate the spirit of these reforms to everyone in their organization". It is funny how easy it is to ask others to do what you yourself, or your controlled operations, fail to do; follow the SPIRIT of our laws.
In my fight against the abuses of naked shorting and the resultant trade settlement failures that dilute our investments I did some research. That research started with going to the Congressional Charter, "The Constitution", that the SEC operates under; The Securities Act of 1934. I read this Act and tried to understand not only the letter of the law identified but also the spirit intended by it's writers. Here is what I came up with along with some Regulatory rebuttals to my views.
Section 17A -- National System for Clearance and Settlement of Securities Transactions
a. Congressional findings; facilitating establishment of system
1. The Congress finds that--
A. 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.
B. Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
My Interpretation: Congress is identifying to the Regulators that for the safety and protection of both the investor and the industry members themselves, prompt settlement of trades MUST be achieved.
Regulatory Comments: There is also a part of the Securities Act that addresses what the member firms must do in the event of a settlement failure. The firms must put up net capital reserve to protect the investors in an event of failures in the system.
The Spirit of the Law: Congress is telling the Industry that for the safety of the Industry they should be focused on prompt settlement of trades. If, however, for any reason a trade does fail we will put in place temporary measures to handle such events. The underlying goal is still to settle ALL trades promptly.
It is the Spirit of the Law that has this issue all embroiled in turmoil. A Turmoil that puts the wealth and power of the industry up against the small retail investors and struggling business. Chairman Donaldson and the Regulatory teams of the SEC and SRO's are neglecting the Spirit of the law and the line of command of the laws.
To explain my viewpoint let me use an analogy to help:
When you travel down a major highway there is generally a breakdown lane. It is unlawful to use the breakdown lane for general travel purposes (Section 17A of the Securities Act). However, there will be circumstances that create opportunities where the use of the Breakdown lane is permitted for use on a short-term basis such as accidents or road repairs (Net Capital Reserve). Just because you were provided access to this use the lane today on a short-term basis because of such an event it does not now make it legal to make it the new standard mode of operation. That is where the Industry has taken trade settlement failures and net capital reserves.
What were put in place to address the short-term failures became standard operating procedures and Investors became defrauded. This allegation is only re-affirmed by an Executive VP of Charles Schwab when he informed the SEC in a comment letter that the Industry has a "Behavioral Issue" with settlements that needs to be addressed. The Industry is using the breakdown lane and accidents are happening. Innocent people are being harmed.
As the battle lines continue to develop think of a few oddities in what is transpiring here:
1. Regulation SHO, recently released by the SEC defines a line in the sand for abusive settlement failures. The SEC has not mandated that all trades settle within any specific timelines (T+3, T+3+10, T+3+10+5?..) instead they have accepted settlement failures as a part of standard business. That VIOLATES the letter and the spirit of Section 17A of the securities Act.
2. When settlement failures become abusive, the SEC still does not force the settlement of those trades but instead simply mandates that that client and that firm can no longer short sell the security until they do settle the trades. Why again have they neglected to force immediate settlement?
These same regulators are aware that the criminal elements usually have multiple accounts and multiple aliases.
3. Net Capital Reserves. The Regulators have informed me that it is the Brokerage houses that take on the risk and liability of the settlement failures by locking up their capital until the trade settles. I ask; why would a Broker, representing a buyer put up net capital to cover the unsettled trade because the seller never delivered? The Industry does NOTHING unless it is profitable to them so why would a Brokerage firm put up their money to protect another firm if it was not financially beneficial to them? Why not force the seller to deliver and keep your money liquid?
I believe it is because it is lucrative business as these settlement failures create the market liquidity that creates trade commission revenues.
Presently, the SEC and NASD have publicly stated that there are some issuers who have settlement failures that exceed the entire public float of their companies. These failures are a direct result of the Industry ignoring the letter and the spirit of Section 17A of the Securities Act of 1934. To complicate matters, these same member firms that amassed the liabilities of unforced settlements, at the detriment to the investors, are now taking control of the trading in these securities by imposing their own restriction on these stocks. They are imposing "Sell-Only" restrictions to their clients because of the settlement failure problems.
What do the Regulators have to say about this? They will once again side with the Member firms who impose these restrictions highlighting that it is in YOUR best interest to no longer buy stocks the Industry cannot settle. But if I am a shareholder, and the market is sell-only, what maintains present and future stock pricing? How is my present investment protected?
Who are the buyers if I cannot buy? The answer is, the people who NEED to settle up their trades. The people that created the depressed pricing based on dilution are now the only ones allowed to purchase the stocks back. They force me out and take my shares in a controlled market set-up. This sounds like collusion to me.
The Industry has again taken steps to protect itself from financial ruin and has passed that burden on to the investors. It was not the investors buying the security that created the mess with settlement. The Industry never notified them when they purchased their stock that it was a journal entry settlement failure. No, the Industry took your commission, said thank-you, and allowed the manipulation to continue. Now that they abused the Spirit of the Securities Act, and their financial liability became intolerable, they simply said, I have to go out and buy this stock to start settling so I need to box out other buyers to prevent competition in pricing. You lose, We win. It is Research Fraud, IPO Fraud, Mutual Fund Late-trading all over again. The self-interests of revenues is put above the protection of the investors. If there were no self-interests to the Industry, and their money was already locked-up in capital reserves, why won't they just settle the trades? Ultimately that is the question. Why is every major brokerage firm risking Federal and State Court cases to protect these UNSETTLED trades instead of just settling them? Are they doing this for the goodness of the Investors and companies suing them?
Chairman Donaldson talked about following the spirit of the law. Instead of following his own advice, however, the chairman and his staff created a new reform package that not only violated the spirit of the Securities Act but the letter of the Act as well. Section 17A of the Securities Act is the primary Law with regards to trade settlements. The follow on guidelines that talk about short-term means to address acceptable deviations to that are also law but intended for short-term usage. That was the spirit anyway.
It is time our securities regulators stopped playing lawyers and politicians trying to protect a corrupt Wall Street and focused more on both the Spirit and letter of the laws that are to use to guide them through their days. The SEC is an INVESTOR PROTECTION agency and has NO rights or guidelines to put the protection of a single company above the protection of any investor. Failing to force the Industry to use some of that net-capital set aside to settle our trades is criminal in spirit if not in letter.
If I am mistaken by these assumptions than the SEC and SRO's need to make it clear to me and the millions of others that are viewing this issue in this manner. We read the laws you provide us and if your laws are misleading fix them. We also understand that we purchase a stock in a company we expect that we have become rightful owners in that company.
Retail investors have NEVER been informed that what is in our account statements in no way represents our factual ownership in a company.
Abusive settlement failures has created false ownerships and a dilution in our investments that we need to be informed of as we make our investment decisions. The industry cannot operate under cloak and dagger from both regulators and Industry practices.
Dave Patch
www.investigatethesec.com
justanother fool ... MMs really work like this:
This is the from the "inside" ... a Compliance Officer.
... Market Makers and broker/dealers have rigged the game so they can play by a different set of rules than the general public and, to date, this ha been protected by the regulatory bodies. These market makers and broker/dealers have done this for no other reason than to line their own pockets, under the sham of maintaining "fairness" in the market. Every day, market pros short sell IPO's, short sell on downticks, and short sell without regard to the availability of certificates, all things done at the expense of individual investors, who do not have the right to do the same. They do it quietly, without regulation, and without a requirement for disclosure; often in direct contradiction to the public "recommendations" of analysts from the very same firms which I believe is another area that the regulatory bodies should be aware of (for example look at the recent action in AMZN where outlandish price targets were placed on the stock creating a price run right before the stock pre-announced a financial warning). The public will be best served by administering the markets so that every investor wishing to place their own money in an "at-risk" trade be allowed to do so under the same rules.
Therefore, I urge you to eliminate current restrictions on short selling, and allow the public to sell short by the same rules as market makers.
I thank you for your time and consideration and would be more than happy to discuss this with anyone on your staff.
Sincerely,
JBL
http://www.sec.gov/rules/concept/s72499/loverde1.txt
SEC, NASD At Odds Over Status of Proposal
Mark Faulk - Aug 5, 2004
In March of 2004, the NASD filed a proposed rule change with the SEC that would replace existing rules (Rule 3210 and Rule 11830) with a new rule "requiring that clearing firms make delivery, or take affirmative steps to make delivery, within 10 business days after settlement date for all short sell transactions" http://www.nasdr.com/pdf-text/rf04_44.pdf .
The proposal has languished there for the past five months while the SEC passed its own version of a "reform package", Regulation SHO (which had been in the works since 1999, and was finally released for public comment in October of 2003), then promptly gutted it just before passing it last month, citing, as the SEC's Annette Nazareth so eloquently put it, "overwhelming comments from the industry." www.faulkingtruth.com/Articles/Investing101/1006.html
Instead of the sweeping reforms that investors had hoped for, Regulation SHO is a watered-down version that does absolutely nothing to curtail the rampant fraud that has plagued the stock market for decades. The SEC, which promises in it's mission statement "to protect investors and maintain the integrity of the securities market", instead caved in to pressure from the industry: the brokers, the clearing houses, and the market makers, all who have pocketed massive profits from the lack of oversight on short selling at the expense of the same investors that the SEC is pledged to protect.
Protect investors?... Maintain the integrity of the securities market? … Regulation SHO does nothing to accomplish either.
To investors who have been victimized by fraudulent short selling for years, the NASD rules awaiting approval from the SEC seemed in many ways to be their "last hope". It actually promised to adopt the "zero tolerance" approach that NASD Executive Vice President Barry Goldsmith vowed to take against stock market fraud when he spoke at a congressional hearing in September of 2000. Unlike the SEC's Regulation, the NASD guidelines were clear and addressed the very issues that have plagued the market for years.
NASD is "Reconsidering" its Rule …
Indeed, it looked as if there was still hope for investors - until three days ago the SEC cast a cloud of doubt over the fate of the NASD proposal when in response to a question from Dave Patch at www.investigatethesec.com regarding the status of the NASD rule application, the SEC’s Peter Chepucavage said: “It is my understanding that the NASD is reconsidering its rule and you need to speak to them."
It was a stunning statement, especially since the NASD website still has the rule listed on its site as "awaiting SEC approval". Patch also told me "my contacts at the NASD were amazed that I would receive something like this since it is not public information".
As seems always the case when trying to get a straight answer out of either the SEC or NASD, things get a bit murky.
This exchange of emails speaks for itself, I'll try to separate the wheat from the chaff as we go along:
--------------------------------------------------------------------------------
Monday, August 02, 2004 10:30 AM
To: Peter Chepucavage, SEC
From: Mark Faulk, The Faulking Truth
Subject: NASD short selling rules
Peter,
I am currently working on an article concerning the proposed NASD short selling rules. I just received a copy of an email from you stating that the "NASD is reconsidering" the rule package. Can you confirm this for me? I have a call in to the NASD as well, but I would like to have confirmation from you that this is indeed your email. Also, has the request that the NASD filed for review with the SEC on March 9 been officially withdrawn? If not, why do you state that it is being "reconsidered", and do you have any idea why? This issue is very important, and judging from our increased readership (over 65,000 direct hits a month, and hundreds of thousands more through reprints and distribution by financialwire.net and other news services), I am not alone in that opinion.
Mark Faulk
His reply was short and to the point:
Monday, August 02, 2004 11:14 AM
To: Mark Faulk, The Faulking Truth
From: Peter Chepucavage, SEC
I must defer to the NASD.
--------------------------------------------------------------------------------
Monday, August 02, 2004 12:34 PM
To: Peter Chepucavage, SEC
From: Mark Faulk, The Faulking Truth
Peter,
I just spoke with Maurine Hawkins at the NASD, and she told me that the official status is that they are waiting on approval from the SEC. I'm writing this article, so I need your take on this. Why did you make your earlier statement, and what information was that based on?
Thank you, Mark Faulk
Again, Peter is a man of few words (although by the time this was over, he probably wished he was a man of no words):
Monday, August 02, 2004 12:52 PM
To: Mark Faulk, The Faulking Truth
From: Peter Chepucavage, SEC
That is incorrect and you should tell her to call me.
--------------------------------------------------------------------------------
Monday, August 02, 2004 2:29 PM
To: Peter Chepucavage, SEC
From: Mark Faulk, The Faulking Truth
Peter,
Thanks, I just spoke with her again, and she got off the phone for a minute, and then came back and told me that she had the same information that I did, which is that it is "officially pending approval from the SEC". She then said she would look into it further and call me back. I relayed your email message to me, so she might be calling you shortly. I am writing this tonight, but I'd like to find out what the real story is before I do. Otherwise, I have to go with the information I have in hand. Here is her phone number in case you want to call her and get your stories straight:
Maurine Hawkins
Office Of General Counsel,NASD
(301) 590-6500
Thanks again,
Mark Faulk
Then, a different approach … instead of answering me directly, Peter sent me a copy of an email he received from Terri Reicher at the NASD. Apparently, they followed my advice and "got their stories straight", even though the question they answered wasn't the question I had been asking:
Tuesday, August 03, 2004 1:35 PM
To: Mark Faulk, The Faulking Truth
From: Peter Chepucavage, SEC
As for the short sale rule filing, you asked whether NASD had withdrawn the rule filing from the SEC, I told you that we had not. Your most recent voicemail indicates that the SEC now confirms what I told you. If NASD withdraws or amends the rule filing, that action will be publicly available.
Terri L. Reicher
Associate General Counsel
Office of General Counsel
NASD
1735 K Street, N.W.
Washington, DC 20006
--------------------------------------------------------------------------------
So apparently, the SEC now agreed with the NASD that the rule filing had not been "officially" withdrawn, which we all knew from the very beginning, and wasn't even the question I had asked, which was:
Is the NASD "reconsidering its rule", if so, why, and if not, why did Peter Chepucavage say that they were?
Finally, I received a phone call from Nancy Condon at the NASD, who apparently inherited the task from Maurine Hawkins. According to Condon, "Rule 3370 is not withdrawn, but in light of the passage of the SEC's Regulation SHO, we are going to have to reconsider it. There is some duplication between SHO and the NASD proposal". Interesting point, but once again, it only raises more questions: If the NASD was worried about duplicating the regulations contained in SHO, why did they file the application at all, instead of waiting for the SHO regulations to go into effect? SHO was officially opened for public comment in October of 2003, a full five months before the NASD filed its rule package. When asked that question, Condon said, "I'm not going to comment on that. SHO has been passed, and we're taking a look at the NASD rule".
So is it currently being reconsidered or isn't it? Condon claims that no official action has been taken, and in response to Peter Chepucavage's statement that it was currently being "reconsidered", and that the NASD's statement that they are "waiting on approval from the SEC" is "incorrect", Condon said simply, "I have no idea where the guy at the SEC got his information".
But, we're not quite done yet. Just to change things up a bit, I called Peter Chepucavage's direct line, but sadly, he wasn't available to take my questions. However, I did leave him a message relaying what the NASD had told me. He never returned my call, but, low and behold, I came home to find one last email from Mr. Chepucavage:
Tuesday, August 03, 2004 2:30 PM
To: Mark Faulk, The Faulking Truth
From: Peter Chepucavage, SEC
Mark, the filing is not waiting sec action. The NASD has told us they are taking additional action before we put it out for comment.
He Said, She Said
Okay, let's summarize:
He said: The NASD is reconsidering its rule.
Then …
He said: Talk to the NASD.
She said: The NASD is waiting on approval from the SEC.
He said: She's wrong, have her call me.
She said: Officially, the NASD hasn't withdrawn the rule filing .. (Duh!)
Then …
She said: I have no idea where the guy at the SEC got his information.
And finally,
He said: The filing is not waiting SEC action. The NASD has told us they are taking additional action before we put it out for comment.
The Investor's Advocate ..
According to Dave Patch, "The Securities Act of 1934 (Section 17A) specifically addresses the needs for prompt and accurate settlement of all trades. The SEC and NASD have both admitted that trade settlements are not taking place, or being enforced, and those failures are resulting in abuse and manipulation in our marketplace. The SEC went so far as to say that 4% of all publicly traded companies have some level of abuse on their stock (600+ companies). Where is the Zero Tolerance?"
So, where does that leave investors? Once again, this issue, and "efforts" by the SEC and the NASD to deal with it, has raised more questions than it has answered. Is the NASD rule package awaiting approval, as the NASD contends, or has it been "unofficially" put on hold, as the SEC claims?
Will NASD in the end cave in to the same industry pressure that the SEC succumbed to when it gutted Regulation SHO, or .. Will it stick to its guns and do the right thing for the American investor?
And why has the SEC dragged its feet for years on this issue, and even hindered efforts by NASD to stop the corruption that has cost investors literally hundreds of millions of dollars?
In the end, these are the questions that every investor, in fact every American, needs to ask, and that the SEC (and the NASD) needs to answer. Only then can they ever hope to live up to the SEC's self-proclaimed title: "The Investor's Advocate". And that is the Faulking Truth.
--------------------------------------------------------------------------------
Take a look at the NASD Rule filing:
http://www.nasdr.com/pdf-text/rf04_44.pdf
Questions or comments for the SEC or NASD? Here's who to contact:
Peter Chepucavage, Attorney Fellow, Division of Market Regulations, SEC
phone: (202) 942-0163 email: chepucavagep@sec.gov
Nancy Condon, Public Relations, NASD
phone: (202) 728-8379
Terri Reicher, Associate General Counsel, NASD
phone: (202) 728-8967
--------------------------------------------------------------------------------
And here's some fun reading from the SEC website (in case you've forgotten what they are supposed to be doing):
The Investor's Advocate: How the SEC Protects Investors and Maintains Market Integrity
http://www.sec.gov/about/whatwedo.shtml
--------------------------------------------------------------------------------
Add your name to our "Stockgate activist list" at info@faulkingtruth.com. We will email you only when we have new articles or information dealing with this issue. Please link the articles everywhere you can, post them on stock message boards, and send them to the appropriate public entities. To enact positive change requires positive action.
--------------------------------------------------------------------------------
Investing 101 Archives:
Financial Terrorism in America (Mark Faulk, Mar 19, 2004)
Pump and Dump or Short and Distort? (Mark Faulk, Apr 18, 2004)
Response From Berliner Freiverkehr and The Berlin-Bremen Stock Exchange (The Faulking Truth, Jun 3, 2004)
The Berlin Connection? SEC and NASD to Meet With German Brokerage Firm Tomorrow (Mark Faulk, Jun 3, 2004)
Is Dateline Losing Credibility Over StockGate Story Delays? (Mark Faulk, Jun 11, 2004)
Who's Looking Out For You? SEC Critics Seeking Investigation (Mark Faulk, Jun 27, 2004)
He Said, She Said: SEC, NASD At Odds Over Status of Proposal (Mark Faulk, Aug 5, 2004)
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http://www.FaulkingTruth.com/GuestBook/
Zero Tolerance? When regulators define zero as greater than 1.
In September of 2000 Barry Goldsmith, Executive Vice President of NASD Enforcement, spoke in a Congressional Hearing before a House sub Committee on Finance and Hazardous Materials. His testimony was with regards to Organized Crime and other criminal enterprises infiltrating our markets. The Executive Vice President, in that Hearing vowed that the NASD would adopt a policy of "Zero-Tolerance". (http://www.nasdr.com/1420/goldsmith_04.asp) We now know "Zero-Tolerance" to fraud means something different between Mr. Goldsmith, the NASD, and the Investors being abused.
The NASD is presently reconsidering a proposal (Short Selling Settlements) that they submitted to the Securities and Exchange Commission in March of 2004(http://www.nasdr.com/filings/rf04_44.asp). The rationalization to reconsider this proposal is quite clear. The NASD is about to retain a tolerance for fraud. At least when it is beneficial to the members they are to regulate.
The proposal submitted to the SEC is with regards to trade settlement requirements on short sales. The NASD submitted this proposal some 5 months after the SEC put out their short selling reform package dubbed Regulation SHO. Clearly the NASD was aware of the SEC's proposal when they submitted theirs to the SEC for public comment and approval. So, why does the NASD's proposal sit idle?
From Communications with both the SEC (Peter Chepucavage, Division of Market Regulation (202) 942-1063) and Teri Reicher (NASD's Office of General Council (202) 728-8967) it appears that the NASD and SEC are blaming each other for the failure in having this reach public comment. The SEC claims that the NASD has discussed with the SEC that they are reconsidering this proposal while the NASD claims the SEC has it for review. Eventually the story leaks out that maybe the NASD is really reconsidering this proposal but has not yet decided ? They are biding for time. In the mean time they are informing the public through their web page that it is at the SEC for review. Semantics! They Both hope we all forget it is there and thus the manipulation will continue.
So what is it about this proposal that needs to be reconsidered? Simple. This proposal was drafted with "Zero-Tolerance" in mind against fraud. It was drafted before the SEC finalized Regulation SHO and thus the NASD was unaware of the Regulatory backpedaling the SEC was about to incorporate. Suddenly when SHO was released in June the NASD proposal, which calls for "Zero-Tolerance" became too strong. The NASD could back off from the pain they were about to impose on the member firms because the SEC did. The NASD found an out that would allow them to achieve "Partial-Tolerance" as the SEC defined an acceptable level of settlement failure abuse.
The Securities Act of 1934 (Sections 17A) specifically states that all trades shall be settled promptly. That Securities Act is the "Constitution" that the SEC must set forth their regulations to comply with. The Securities Act does not allow for threshold levels of failures. It does not provide for minimal abuse. It does not allow for Member grace periods. It does not identify two sets of rules for trades above a threshold level and below a threshold level. The Securities Act states that ALL trades shall be promptly and accurately settled for the protection of the Investor and the Industry. The NASD took this to heart and the SEC did not. The SEC, in Regulation SHO VIOLATED the constitution of the securities Industry and now the NASD is being pressured to do the same.
When does "Zero-Tolerance" mean something other than ZERO? When taking a "Zero-Tolerance" approach bites the hand that feed you. A "Zero-Tolerance" policy will only impact the members who reap the benefits of settlement failures and thus the "Zero" became "some" tolerance The SEC claims today that 4% of all publicly traded companies have settlement failures above the Settlement Failure threshold they identified in Regulation SHO. That represents some 600 Companies. Who abused these companies, who reaped the benefits of these excessive trade volumes that resulted in failures? The Industry Members! The very people the SEC is willing to violate the Securities Act to protect and the very people the NASD are directed to regulate. Instead the NASD and SEC backpedal and violate the rights of Investors.
Call up Peter and Teri and ask them why this proposal, now 5 months released by the NASD to the SEC, has not yet reached public comment. See if they put you into the game of hot potato they like to play. In the end, try to understand why a simple reform package that simply defines a clear set of guidelines on how trades must be executed and settled cannot get through the beginnings of an approval cycle. Then ask yourself what "Costs cannot be a factor in justification of Settlement Failures" really means. Is that what this is about? That the Industry is not settling trades because of COSTS and thus the Investors rights are being sacrificed?
Barry Goldsmith stated that there would be a "Zero-Tolerance" to fraud. When will that "Zero-Tolerance" be enforced against a corrupt industry and failed regulatory activities?
Dave Patch
www.investigatethesec.com
Is this a good idea on how to deal with “naked shorting”?
A former Wall Street Community Compliance Officer urges the SEC to allow the public to adopt the MM and broker/dealer’s covertly rigged and protected practices. A game he describes as one the authorities quietly permit by ignoring regulations and without the requirement for disclosure.
If you disagree with this proposal, petition Congress to stop this NAKED SHORTING nonsense by having the SEC investigated for doing as little as possible to stop it …
http://www.investigatethesec.com/
Date: 01/31/2000 6:21 PM
Subject: Subject: File No. S7-24-99 Comments
To Whom It May Concern:
I am a retired member of the Wall Street Community after spending years in the Operation & Compliance (as both a senior member and director of both departments) sides of NASD member firms. This included the oversight of the trading activities of numerous branches, registered representatives, and the actual Trading Departments of the last two firms I worked for. As part of these activities I have spent numerous hours reviewing trading operations and compliance as well as immeasurable amounts of contact with both NASD and SEC regulatory officials.
I am writing this to you regarding the above referenced matter as I feel compelled to offer my comments on the subject at hand.
It is my persona belief that it is of the utmost importance to maintain, and strive for, the concept of "fair markets". To that extent I believe that it is absolutely necessary that you level the playing field for the investing public with regard to the trading strategy of short selling.
It is time to create, and enforce, a single set of short-selling rules which will apply to specialists, market makers, broker/dealers, and the investing public. As such, I urge you to remove what I believe to be the inequitable and discriminatory regulations that restrict the public investor's ability to short-sell stocks, while providing preferential treatment only for the market makers and broker/dealers.
While I understand that most novice investors do not understand, or appreciate, the critical check-and-balance afforded by the action of short selling in the exercise of free markets. Since the industry itself makes no effort whatsoever to educate the public with regard to short selling (this is one of the more sophisticated investing strategies that they fail on, much less the proper use of margin and/or the trading of options), the public is left to draw the erroneous conclusion that it is short sellers who should be blamed when a stock goes down in price.
Regrettably, this lack of understanding applies most directly to the new generation of "do-it-yourself" investors spawned by the proliferation of access to information and gossip enabled by the internet. Many treat the internet as a tool to generate "momentum" for stocks as though it is a football game. Rapid runups are easily fabricated for reasons having nothing whatever to do with the value of the underlying security. Furthermore, as I know the SEC actively is monitoring "chat rooms" on various internet investing websites this should be quite apparent to regulatory officials. It is extremely disheartening when you see this in those rooms dedicated to the trading (loosely defined in some occasions) of stocks that trade on the NASDAQ Small Cap and/or OTCBB markets. In these cases the promoters, and/or the issuers paid posters who hype the stock, use the specter of short sellers to soothe the long stock holders who are being materially damaged when the insiders in these stocks liquidate their shares into the buying of the unsuspecting public. For example, most OTCBB investors on these sites are completely unaware that, in the US, you cannot short sell an OTCBB stock, yet this blaming of the short sellers routinely occurs. A better educated public would not be so susceptible to this tactic.
However, on the flip side, market makers and broker/dealers have rigged the game so they can play by a different set of rules than the general public and, to date, this ha been protected by the regulatory bodies. These market makers and broker/dealers have done this for no other reason than to line their own pockets, under the sham of maintaining "fairness" in the market. Every day, market pros short sell IPO's, short sell on downticks, and short sell without regard to the availability of certificates, all things done at the expense of individual investors, who do not have the right to do the same. They do it quietly, without regulation, and without a requirement for disclosure; often in direct contradiction to the public "recommendations" of analysts from the very same firms which I believe is another area that the regulatory bodies should be aware of (for example look at the recent action in AMZN where outlandish price targets were placed on the stock creating a price run right before the stock pre-announced a financial warning). The public will be best served by administering the markets so that every investor wishing to place their own money in an "at-risk" trade be allowed to do so under the same rules.
Therefore, I urge you to eliminate current restrictions on short selling, and allow the public to sell short by the same rules as market makers.
I thank you for your time and consideration and would be more than happy to discuss this with anyone on your staff.
Sincerely,
JBL
http://www.sec.gov/rules/concept/s72499/loverde1.txt
SEC Moves to Shut Down Hedge Fund
By REUTERS
Published: August 2, 2004
Filed at 5:51 p.m. ET
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission said on Monday it took “emergency” legal action to shut down Fountainhead Asset Management, a Philadelphia-area hedge fund that the SEC accused of fraud.
U.S. District Court Judge Legrome Davis issued an order sought by the SEC to freeze the assets of the fund's two partners -- Anthony Postiglione and William Lennon -- and stop them from breaking securities fraud laws, the SEC said.
The judge appointed a receiver in the case and scheduled a hearing for Thursday on the SEC's motion seeking an injunction against the defendants, said the market-regulating SEC.
“It appears to be a very egregious and blatant fraud,” said Amy Greer, trial counsel in the SEC's Philadelphia office.
Gregory Stagliano, an attorney for Postiglione, said the SEC's charges were “without merit.”
“At the appropriate time, we will contest them vigorously. For now, we intend to cooperate with the court-appointed receiver to ensure that all of the investors' assets are protected,” Stagliano said.
The action comes amid an SEC push to force hedge funds to register with the agency for the first time by providing information about themselves and opening their books to spot SEC inspections.
The SEC voted last month to formally propose a registration rule, which is supported by SEC Chairman William Donaldson and opposed by the hedge fund industry. In backing the measure, Donaldson has cited a growing caseload of hedge fund fraud.
The SEC said that Postiglione and Lennon raised about $5 million from at least 18 private investors from November 2001 to the present “through a series of fraudulent acts.”
The partners “sent false quarterly statements and newsletters to investors, consistently overstating the fund's value and performance,” the SEC said.
They also overstated Postiglione's personal investment in the fund and the fund's performance, the agency said.
In addition, it said Postiglione and Lennon excessively traded fund securities accounts “for the sole purpose of generating soft dollar credits, which they then withdrew as cash and used for, among other things, their own personal living expenses.”
No one answered the phone at Fountainhead's offices. An attorney for Lennon could not be reached for comment.
Stagliano said, “The SEC complaint grossly understates the current value of assets held by the fund ... Allegations in the complaint that Mr. Postiglione benefited financially to the detriment of his clients are simply untrue.
“Many of the investors were friends and family members, including Mr. Postiglione's own mother and father. To suggest that he would take advantage of these people is not only meritless, but very unfortunate.”
The SEC's action was filed on July 30 in the U.S. District Court for the Eastern District of Pennsylvania. Fountainhead is located in Wayne, Pennsylvania, in the Philadelphia suburbs.
The SEC alleged that Postiglione and Lennon misappropriated several hundred thousand dollars of fund assets for their personal use. As of the date of filing, investor assets in the fund totaled about $1.7 million, it said.
http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5850269
U.S. ups terror alert for financial areas
IMF, World Bank, NYSE, Citigroup, Prudential targeted
By Corbett B. Daly & David Weidner
Last Update: 5:15 PM ET Aug. 1, 2004
WASHINGTON (CBS.MW) -- Citing "unusually specific" evidence of possible al-Qaida attacks against five key financial sector buildings, including the International Monetary Fund and the New York Stock Exchange, Homeland Security Secretary Tom Ridge said Sunday that Washington, D.C. and northern New Jersey would join New York at the orange, or high, terrorism alert level ........
http://cbs.marketwatch.com/news/story.asp?g=77078D1FF5124BD1AE6405320820AE23&siteid=mktw&dis...
Judgement day IS coming imho:
MEMORANDUM
http://www.sec.gov/rules/proposed/s72303/s72303-436.pdf
July 9,2004
TO: File S7-23-03
FROM: Alexandra Albright Division of Market Regulation
RE: Proposed Short Sales Rules; Regulation SHO; File No. S7 23-03
Telephonic Meeting with Options Industry
On May 20, 2004, members of the Division of Market Regulation and the Office of Economic Analysis engaged in a telephonic meeting with the following entities from the options industry: Chicago Board Options Exchange, Susquehanna International Group, L.L.P., First Options of Chicago, Inc., and Citadel Derivatives Group, L.L.P. The discussion concerned "locate" and "fail to deliver" processing relating to the proposed short sales rules. Additionally, the discussion covered risk assessment and hedging transactions. Two of the above entities have submitted separate comment letters. Both the Chicago Board Options Exchange and Susquehanna International Group, L.L.P. reiterated points made in their individual comment
letters.
This IS NOT related ...?
http://ragingbull.lycos.com/mboard/viewreplies.cgi?board=CLB01219&reply=55349
joye1, there are several other posters on the RB board that have had similar experiences with e-trade. I've been following their threads.
By: grannylamb37074
30 Jul 2004, 10:09 AM EDT
Msg. 6777 of 6893
Jump to msg. #
http://www.ragingbull.lycos.com/mboard/boards.cgi?board=NMCX&read=6777
I AM A STOCKHOLDER WITH TWO STOCKS, ONE BEING NMCX THE OTHER IS CMKX. THE POSTS BY CEHJRO AND OAKS ARE COMPLETELY TRUE. I RECIEVED A "FED=EX" LETTER FROM E-TRADE STATING THAT MY ACCOUNT WOULD BE CLOSED AS OF 8/15/04....THE LETTER WAS SENT BY SHANNON WATSON.
I OWN OVER 5 MILLION OF CMKX AND 500,000 OF NMCX.
THE ONLY EXPLANATION I GOT FROM THEM AFTER CALLING E-TRADE AND SPEAKING TO 4 DIFFERENT PEOPLE, INCLUDING A SUPERVISOR, WAS THAT THERE WAS "AN ISSUE WITH THE CERTIFICATES".....THEY WERE NOT WILLING TO EXPOUND AT ALL ON ANY OTHER REASON.....SIMPLY SAYING TO ME TIME AND TIME AGAIN, "YOUR ACCOUNT WILL BE CLOSED, ITS A DONE DEAL !!"
FOLKS, THIS IS REALLY STRANGE....TAKE HEED....WE MAY JUST BE THE FIRST OF MANY OTHERS WHO MAY COME UNDER THIER PLAN OR SCHEME TO TRY TO STEAL OUR SHARES!!! I'M MOVING MY STOCKS IMMEDIATLEY TO ANOTHER BROKER.
Attorney Frederick D. Lipman, a securities law expert at the Philadelphia branch of Blank Rome LLP, said in recent comments to the SEC that "unscrupulous naked short-sellers will post false information about the company in Internet chat rooms, spread false rumors and do everything within their power to do harm to the company. Indeed, the ultimate triumph of a naked short-seller is to drive the company out of business."
http://www.sun-sentinel.com/business/local/sfl-sbnaked01aug01,0,7821987.story?coll=sfla-business-fro...
Jungle explorer is Bill Maher, he played the leading role in
"Cannibal Women In The Avocado Jungle Of Death".
What's this about?
CMKX has its own problems. You better do your DD over at the SEC and ask them about the pace at which the next wave of revocations is progressing. You will not like what you read.
http://ragingbull.lycos.com/mboard/boards.cgi?board=SRCI&read=1137519