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Is this you from RB inittwowinit
CHECK OUT IHB CHATTER
Posted by: Robert I
In reply to: Mighunter who wrote msg# 138055 Date:2/23/2007 2:33:06 PM
Post #of 138059
Anyone know what happened to wavxmaster?
Last week he was posting 15 times a day, hinting we were on the verge of something great any day. Now, he's nowhere to be found. I'll give him the benefit of the doubt and assume he's on vacation.
And my reply........
Posted by: bne
In reply to: Robert I who wrote msg# 138057 Date:2/23/2007 2:37:26 PM
Post #of 138059
All too common amongst some. When things going good, they post all too often. You can tell by the performance of the SP each day who you will and won't hear from that day.
Sort of hypocritical
AND MY NEXT REPLY.........
Posted by: bne
In reply to: Robert I who wrote msg# 138057 Date:2/23/2007 2:38:35 PM
Post #of 138059
Maybe Snackman's on vacation, too?
THINK THEY'LL DELETE THESE?
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View Replies »
News
12-Jul-2006
Other Events
Item 3.01. Other Events.
On July 11, 2006 Wave Systems Corp. (NASDAQ:WAVX) received notice that a Nasdaq Listing Qualifications Panel (the "Panel") has granted Wave's request for continued listing on The Nasdaq Global Market (formerly known as the Nasdaq National Market), subject to certain conditions. The Panel's decision is contingent upon, among other things, Wave's implementation of a reverse stock split to be effected for purposes of regaining compliance with the $1.00 per share minimum bid requirement for continued inclusion on The Nasdaq Global Market under Nasdaq Marketplace Rule 4450(b)(4). On or before July 25, 2006, Wave must inform the Panel that Wave's stockholders have approved a reverse stock split and that the reverse stock split has been implemented. On or before August 8, 2006, Wave's minimum closing bid price must be at least $1 for a minimum period of 10 consecutive trading days. The Panel has reserved the right to extend the period of consecutive trading days or impose other conditions if, during the 10 day period (or longer period, if extended) the Panel determines that such conditions are required to demonstrate that Wave is able to maintain long-term compliance with the minimum bid price and other listing requirements. The Panel has also reserved the right to reconsider the terms of the relief described above based on other developments that would make continued listing inadvisable or unwarranted.
On June 26, 2006, Wave filed a definitive proxy statement with the SEC for a special meeting to be held on July 24, 2006 seeking stockholder approval permitting the board to implement a reverse stock split of Wave's common stock at a ratio of either 1:2, 1:3 or 1:4. If a reverse stock split is approved by the stockholders at the meeting, Wave's board of directors will determine whether a reverse stock split remains in the best interests of the company at that time and, if so, the ratio at which the reverse stock split will be effected (either 1:2, 1:3 or 1:4).
In the event that the Panel's requirements are not met, Wave would apply to have its common stock transferred to The Nasdaq Capital Market, as long as it continues to satisfy the applicable initial listing requirements for such market other than the minimum bid requirement. If such application is approved, Wave would be afforded the remainder of The Nasdaq Capital Market's 180 calendar day compliance period (i.e. until October 21, 2006) in order to regain compliance with the $1.00 minimum bid requirement.
05/30/06
SHAREHOLDER ALERT
e.digital CORPORATION releases BUSINESS UPDATE
Company Provides Update on Complaint, eVU™ Business Developments,
and Efforts to Monetize Flash Memory-Related Patent Portfolio
(SAN DIEGO, CA, May 30, 2006) – e.Digital Corporation (OTC: EDIG), a leading innovator of proprietary, secure digital video technology and products, and patented technology in the utilization of flash memory in portable devices, released an update today on the recently filed digEcor complaint, eVU™ business developments, on-going efforts to monetize e.Digital’s flash memory-related patent portfolio, and other company developments.
digEcor Complaint
We have engaged Utah counsel to answer digEcor’s complaint filed May 4, 2006. Our answer is expected to include, but may not be limited to:
• Notice of removal to move the complaint from state court to federal court where we believe this matter belongs and where we can argue against the complaint more expediently, and pursue contemplated counter claims
• Motion to dismiss the unwarranted injunctive relief claim. Among other defenses, we believe the April 2002 non-disclosure agreement was superseded by a subsequent October 2002 agreement that has since expired and therefore there is no basis for injunctive relief.
• Motion to seek a declaratory judgment on the injunctive relief claim.
Other legal action is also being contemplated. Our counsel is scheduled to file a response to digEcor’s complaint during the week of June 5th. We are also contemplating revoking all our software licenses that digEcor utilizes to operate the digEplayers™ they have purchased. (For more information about the digEcor complaint, please view the following link: http://www.edigital.com/shal051706.htm )
1250 Unit digEplayer™ Order
While we have received recent verbal and e-mail assurances from Maycom that they intend to perform under the November 2005 digEcor purchase order, we are waiting for a definitive manufacturing schedule from them. With the assistance of a law firm in Korea, we are pursuing legal remedies against Maycom and its principal to compel their performance. (For more information regarding this order, please view the following link: http://www.edigital.com/shal033106.htm ).
eVU™ Business Developments
In spite of the digEcor complaint, we are experiencing growing interest from prospective eVU customers in the healthcare and travel and leisure industries, particularly from the
in flight entertainment (IFE) industry. We are pleased to announce that we have signed our first IFE eVU agreement and received our first IFE eVU order, details of which we expect to announce next month along with other eVU business.
We have put in to place the key elements of a turnkey entertainment services business including financial services partners for qualifying customers to lease eVU units as well as provide warranty and insurance coverage in case of failure, damage, or normal wear and tear. Our turnkey service enables qualifying eVU customers to get eVU units into the hands of their customers/passengers/patients and quickly begin generating revenue without significant initial costs. Not only are our eVU costs and product margin covered up front by a financial services company on qualifying orders, in many cases we also expect to receive monthly content, logistic services, and warranty fees over the lifetimes of the contracts. Based on our expected product and leasing margins and our turnkey entertainment services being fully implemented, we believe we can become profitable with annual eVU sales of approximately 4,000 units.
Flash Memory Patent Portfolio
The preliminary independent evaluations we have received to date on our flash memory-related patents and claims are encouraging, particularly on our #5,491,774 patent. Based on this progress, and with the assistance of outside parties, we are beginning an intensive three-month process to identify the products and companies that may be utilizing our intellectual property and attempt to determine a monetary value on our claims and patents as they relate to the revenues being generated by these products. This effort will also include preparing the agreements and materials necessary to begin approaching potential licensees of our patent portfolio. We expect to provide more details about this in June.
New Address
Last year, the building where we have been headquartered in approximately 7,500 sq. ft. for almost nine years was sold to a new owner. The new owner’s preference was to lease the entire 108,000 sq. ft. facility at Evening Creek Drive South to one tenant. However, the new owner informed us of other facilities under their ownership that could serve as our new offices. Earlier this year, we came to terms on a 4,800+ sq. ft. facility located at 16770 West Bernardo Drive, San Diego (92127). Please be advised that, this week, we are vacating the old facility and moving into the new offices so our phone and e-mail service may not be fully operational until Monday, June 5th.
About e.Digital Corporation:. Through customer and partnering relationships, e.Digital is a provider of secure portable Video on Demand products. e.Digital’s services include the licensing of the Company’s MicroOS™, Content Mark-Up Language (CML) application, patent-pending Hardware Security technology, Digital Rights Management (DRM) solutions, Content Download software, and Video Display software applications. In addition, e.Digital partners with leading, innovative companies, designing and providing manufacturing services for products employing the Company’s proprietary digital technology platforms. For more information about e.Digital and its technology platforms, please visit the company website at www.edigital.com.
Safe Harbor statement under the Private Securities Litigation Reform of 1995: All statements made in this document, other than statements of historical fact, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development, expected future developments and other factors that we believe are appropriate under the circumstances. These forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the businesses of the Company and the industries and markets in which the company operates. These statements are not guarantees of future performance and involve risks, uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to the Company’s ability to finance its operations, favorably resolve the complaint filed by digEcor, Inc. against the Company and certain of its officers and employees, sell its products, implement a turnkey financial, product, and maintenance solution, manufacture and ship orders in a timely manner, secure additional business, and other risks identified and discussed in our filings with the Securities and Exchange Commission (“SEC”). Actual outcomes and results may differ materially from what is expressed or implied by the forward-looking statements. More information about potential factors that could affect the Company can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed with the Securities and Exchange Commission (“SEC”). e.Digital Corporation disclaims any intent or obligation to update these or any forward-looking statements, except as otherwise specifically stated by it.
Note: eVU and MicroOS are trademarks of e.Digital Corporation. All other company, product, and service names are the property of their respective owners.
Press Contact:
Robert Putnam
(858) 679-1504 ext.205
pr@edigital.com
I think he said as of friday all new computers for the gov must have tpm 1.2 in them.
On March 28th, 17 of our top companies will be presenting at our San Francisco at our Recognizing Opportunity institutional conference at the St Regis Hotel. Presenting companies include:
Ampex (Nasdaq: AMPX), Elron (Nasdaq: ELRN), Internet Gold (Nasdaq: IGLD), Pacific Ethanol (Nasdaq: PEIX), LJ International (Nasdaq: JADE), ViaSpace (OTCBB: VSPC), Wave Systems (Nasdaq: WAVX), and GigaBeam (OTCBB: GGBM).
The morning sessions will be presentations and the afternoon comprised of breakout sessions and one on ones. Please use the link below to reserve you place.
www.jmdutton.com/conference_032806/mark_your_calendar.html
Here is the story Howardjoel
Watching Small-Cap Security Software & Services Names
A previously unknown security flaw in Microsoft's (MSFT) Windows operating system may get a little more attention Friday after a Washington Post article entitled, "Windows Security Flaw Is 'Severe'. Although the flaw was revealed on Tuesday, the Washington Post article and statements from Microsoft representative may make PC security one of today's top stories. The Post article suggests that Microsoft is "scrambling to come up with a fix", while Mike Reavey, operations manager for Microsoft's Security Response Center, called the flaw "a very serious issue." Watch for action in the top security names such as: SYMC, VRSN, CHKP, MFE, TMIC, WBSN, ISSX, RSAS, SFNT, MVSN, VDSI, ENTU. But it's not just the big names. Watch for the small-caps to get into the fray. Already this morning, WatchGuard Technologies, Inc (WGRD) has issued a press release suggesting its products offer protection from the latest Microsoft vulnerability. Other small-cap names to watch...
- WatchGuard Technologies, Inc (NasdaqNM: WGRD)
- Aladdin Knowledge Systems Ltd. (NasdaqNM: ALDN)
- BindView Development Corp (NasdaqNM: BVEW)
- Certicom Corporation (OTC: CERTF)
- Tumbleweed Communications Corp (NasdaqNM: TMWD)
- Wave Systems Corp (NasdaqNM: WAVX)
- Intrusion, Inc (NasdaqSC: INTZ)
- Citadel Security Software Inc (NasdaqSC: CDSS)
- Komodo Inc (OTCBB: KMDO)
- NetWolves Corp (NasdaqSC: WOLV)
- Validian Corp (OTCBB: VLDI)
- Enigma Software Group, Inc (OTCBB: ENGM)
- Secured Services, Inc (OTCBB: SSVC)
- Manakoa Services Corp (OTCBB: MKOS)
- Patron Systems, Inc (OTCBB: PTRS)
- Coastal Technologies, Inc. (OTC: CTTJ)
- Nexicon, Inc. (OTC: NXCN)
- Com-Guard.com, Inc (OTC: CGUD)
- PivX Solutions Inc (OTCBB: PIVX)
- Cyber Group Network Corp (OTCBB: CGPN)
- Edgetech Services Inc (OTCBB: EDGHE)
- Cirond Corp (OTC: CROO)
NASDAQ Toolbar | © Copyright | Disclaimer | Trademarks | Privacy Statement | Contact Us | Help | Search
Nov-2005
Other Events
ITEM 8.01. Other Events.
e. Digital Corporation has entered into amendments with the holders of the companys 12% Subordinated Promissory Notes (12% Notes) to (i) extend the maturity date under the 12% Notes from December 31, 2005 to December 31, 2006,
(ii) authorize an additional $500,000 in principal amount of 12% Notes (the Additional Notes), (iii) pay the purchasers of the Additional Notes (in the aggregate) a royalty as consideration for the additional financing necessary for the development of the companys new MedeViewer product equal to up to Twenty Dollars ($20.00) for each MedeViewer sold for a period of three years (the Royalty) and (iv) change the terms of conversion.
The full text of each amended agreement is attached hereto as Exhibit 4.50.1 and Exhibit 4.51.2, respectively
OT Interesting reading
<< previous Message Next Message >>
Subject: OT: More on SHO and Cramer views
From hootrod
PostID 400412 On Monday, May 02, 2005 (EST) at 1:19:23 PM
--------------------------------------------------------------------------------
Is this the reason the boards are so quiet today?
Where is everybody? Meetings?
May 2, 2005 (FinancialWire) Companies on the U.S. Securities and Exchange Commission Regulation SHO Threshold list can cry and scream all they want, but in terms of downside volatility, they ain’t seen nothing yet according to General Electric’s (NYSE: GE) CNBC commentator and TheStreet.com (NASDAQ: TSCM) founder Jim Cramer, as the Uptick Rule comes to a crashing end today.
Among companies at the head of the class have been Novastar Financial (NYSE: NFI) and Martha Stewart Living Omnimedia (NYSE: MSO).
In a RealMoney.com column, Cramer called the suspension of the Uptick Rule the “Hedge Fund Relief Act.”
One of the key hedge funds reputedly shorting upwards of one-third of the Threshold firms on the New York Stock Exchange as well as one-fifth of the NASDAQ list is Rocker Partners, LLC, and Helmsman Holdings, both reputedly headed by David Rocker. Companies alleged to be short by Rocker are posted at http://www.webspawner.com/users/rockerscam/index.html
“Because they won't have to wait for an uptick in order to short, hedge funds will do so with reckless abandon. Expect to see companies that mess up taken down harder and faster and more short squeezes. Get ready to see more volatility, i.e., downside action,” warned Cramer.
“You probably aren't even aware of it. Most people don't even seem to think it is important. It's a two inch story at the bottom of page C-4 of The Wall Street Journal,” Cramer noted. “How fitting, though; just like a two-inch block of C4, the plastic explosive, this little note could take the market to kingdom come if used incorrectly. And it will be.
“Here's the deal. Right now, when a company reports a bad quarter and you aren't long it, you have to wait to short until you get an uptick, or you can go into the put market and get a dealer to make a market in puts for you. He has to lay off his short himself, so it really doesn't matter; you can't get a good price and it is cumbersome.
“So, often you just give up. Oh, Molson (NYSE: TAP) reported a bad quarter, eh? Well, I can't get an uptick, no one will pay me a higher price for it and the put market's too illiquid, so on to the next.
“Not anymore,” said Cramer. Starting today, “hedge funds can sell shares short just like they sell them long: with reckless abandon. You could see some real nasty things happen to companies that mess up. You will see them banged down harder and faster than you would ever believe.
“The corollary is true, too, though. You will see some real squeezes upward because people will be much more reckless in what they short and when.
“This rule change, of course, couldn't come at a worse time. The market's terrible. Longs are beleaguered, shorts are emboldened. I think it is fair to say that things are about to get a lot worse, a lot faster for the stocks of bad companies without the slowdown circuit breaker of the uptick rule. But the SEC, in its non-infinite wisdom, dreamed this little doozy up and all I can tell you is that you ain't seen nothing yet.”
Cramer said this rule is “enough to make me want to get back into the hedge fund game. This new rule would have been a license for me to print money on the short side. Not that the SEC would know that kind of stuff, though. It's too busy worrying about the small stuff.
“Get ready for some real volatility, which, of course, is just a code word for downside action!”
Adding to the “Hedge Fund Relief Act” is the fact that those using illegal naked short selling in the past have been granted a kind of amnesty for acts before the first of 2005. The SEC just “grandfathered” those illegally-begotten gains and resultant counterfeit shares into the system, so these windfall gains are now available to downtick with reckless abandon on downticks.
The “grandfathering” admission is at http://www.sec.gov/spotlight/keyregshoissues.htm
In the same document, the SEC has inexplicably stated that not all forms of illegal naked short selling, the equivalent of counterfeiting shares in public companies, are actually “illegal.”
The DTCC actions in the StockGate mire are the most serious, if not notorious since the agent of two SROs, the New York Stock Exchange and NASD is also peopled by some 21 directors whose companies, such as Merrill Lynch & Co. (NYSE: MER), State Street Corporation (NYSE: STT) and Goldman Sachs (NYSE: GS), are unlikely to support the DTCC in what attorney Marshal Shichtman, Esq., has termed “strong-arm” tactics.
The DTCC has admitted it has engaged in an act of censorship of this newsletter in squelching its redistribution by Investors Business Daily, and via Investors Business Daily, to Yahoo Finance, a portal owned by Yahoo! (NASDAQ: YHOO), and it is a suspect in the sudden and so far unexplained “postponement” of a widely anticipated expose by Dateline NBC.
In a wide-ranging letter to the DTCC, Robert J. Shapiro has charged statements made by Larry Thompson, DTCC Deputy General Counsel, were “inaccurate or misleading,” and asked the DTCC to correct the record and respond to his comments and questions.
Shapiro is chair of Sonecon LLC, a private economic advisory firm in Washington, D.C., who served as U.S. Under Secretary of Commerce for Economic Affairs from 1998 to 2001, Vice President and co-founder of the Progressive Policy Institute from 1989 to 1998, and principal economic advisor to Governor William J. Clinton in the 1991-1992 presidential campaign.
He holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, Harvard University, and the Brookings Institution.
Shapiro currently provides economic analysis to the law firms of O’Quinn, Laminack and Pirtle, Christian, Smith and Jewell, and Heard, Robins, Cloud, Lubel and Greenwood, on issues associated with naked short sales, which he noted includes “matters raised in an interview published by @DTCC with DTCC deputy general counsel Larry Thompson.”
He asserts the following in his letter:
Thompson begins by asserting that “the extent to which [naked short selling] occurs is in dispute.” While this statement may be narrowly correct, objective academic analysis has established that naked short selling has been a widespread practice and one which, when allowed to persist, can pose a threat to the integrity of equity markets. A recent study by Dr. Leslie Boni, then a visiting financial economist at the SEC, analyzed NSCC data and found that on three random days, an average of more than 700 listed stocks had failures-to-deliver of 60 million-to-120 million shares sold short – naked shorts – that had persisted for at least two months. In addition, over 800 unlisted stocks on any day had fails of 120 million-to-180 million shares sold short that also had persisted for at least two months. The total number of naked shorts, including those that had persisted for less than two months, was presumably considerably greater.
Regarding the extent of naked shorts, Thompson has provided closely-related additional information: “fails to deliver and receive amount to about $6 billion daily…including both new fails and aged fails.” Thompson minimizes this total by comparing it to “just under $400 billion in trades (emphasis added) processed daily by NSCC, or about 1.5% of the dollar volume.” By most people’s standards, a problem involving hundreds of millions of shares valued at $6 billion every day is a very large problem. Moreover, the $6 billion total substantially underestimates the actual value of all failed-to-deliver trades measured when the trades actually occurred. Most of the $6 billion total represents uncovered or naked short sales, many of which have gone undelivered for weeks or months with their market price being marked-to-market every day. As a stock’s price falls, the market price of naked shorts in that stock also declines, reducing the total value of the outstanding failures-to-deliver cited by Thompson.
In other respects, Thompson’s comparison to the “$400 billion in trades processed daily by NSCC” seems disingenuous and misleading, because that $400 billion total covers not only U.S. equity trades which can involve most of the failures-to-deliver at issue, but many other transactions also processed by the NSCC. The value of all equity transactions on U.S. markets in 2004, for example, averaged $82.3 billion/day. If Thompson is correct that the daily value of fails-to-deliver averages $6 billion, that total is equivalent to 7.2 percent of average daily equity trades or nearly five times the 1.5 percent level suggested by Thompson. Furthermore, the DTCC reports on its website that on a peak day, “through its Continuous Net Settlement (CNS) system, NSCC eliminated the need to settle 96 percent of total obligations.” Assuming that CNS nets out the same proportion of trades on other days, $384 billion of the $400 billion in daily trades cited by Thompson are netted out, leaving only $16 billion in daily trades that require the actual delivery of securities. The $6 billion of fails-to-deliver securities existing on any day are equivalent to 37.5 percent of the average daily trades that require the delivery of securities, or 25 times the 1.5 percent level cited by Thompson.
Thompson tries to explain the large numbers of shares that go undelivered – in most cases arising from naked short sales -- by citing problems with paper certificates, inevitable human error, and the legitimate operations of market makers. This also seems misleading or disingenuous. Regarding problems with paper certificates, the DTCC estimates that 97 percent of all stock certificates are now kept in electronic form. Nor can human error or legitimate market-making operations explain the high levels of failures-to-deliver that persist for months – on any day, an average of 180 million-to-300 million shares have gone undelivered for two months or longer – as documented by Dr. Boni’s analysis of NSCC data.
Thompson also disparages the attorneys who represent companies that have been damaged or destroyed by massive naked short sales, and their shareholders, by claiming falsely that the cases in this matter have almost all been dismissed or withdrawn. The legal firms that I advise -- O’Quinn, Petrie and Laminack; Christian, Smith and Jewell; and Heard, Robins, Cloud, Lubel and Greenwood – have not lost any motions against the DTCC or its affiliates and currently have one case against the DTCC pending in Nevada and another case against the DTCC pending in Arkansas. In addition, on February 24, 2005, these attorneys were granted an order by the New York Supreme Court ordering the DTCC to produce trading records involving two companies they represent, including records from the Stock Borrow program, which may establish whether large-scale naked short sales were used to manipulate and drive down the stock price of those two companies.
Thompson also asserts that the plaintiffs suing the DTCC for damages associated with the handling of naked short sales rely on “theories [that] are not an accurate reflection of how the capital market system actually works.” This assertion is inaccurate. There is no dispute about how the capital markets work -- nor any doubt that naked short sales have been used to manipulate and drive down the price of stocks, as seen in numerous death-spiral financing cases. The issue here is the DTCC’s role in allowing or facilitating such stock manipulation through its treatment of extended naked short sales.
In explaining the DTCC’s role in these matters, Thompson rejects the claim that the NSCC’s Stock Borrow program allows the same shares to be lent over and over again, potentially creating more shares than actually exist or “phantom” shares. By Thompson’s own account, shares borrowed by the NSCC to settle naked short sales are deducted from the lending member’s DTC account and credited to the DTC account of the member to whom the shares have been sold. Therefore, those same shares become available to be re-borrowed to settle another naked short sale and, if that happens, to be re-borrowed again and again to settle a succession of naked short sales. Throughout this process, the actual short sellers may continue to fail-to-deliver the shares to cover their shorts and, as Dr. Boni’s analysis of NSCC data found, the underlying failure can age for months or even years. The process which Thompson describes is one in which shares can be borrowed and lent over and over again, introducing more shares into the market than are legally registered and issued. If any ambiguity remains, Thompson can clarify it by responding to the following query: Once a share that has been borrowed through the NSCC Stock Borrow program is delivered to the purchaser, is that share restricted in any way so it cannot be lent again?
It is important to note that the Stock Borrow program is used when continuous net settlement cannot locate the shares to settle. As a consequence, Stock Borrow is usually called into play when there are relatively few shares available for borrowing. These are propitious conditions for market manipulation: Unscrupulous short sellers undertake large-scale naked short sales involving stocks for which few shares are available for trading and lending, relying on the Stock Borrow program to borrow the limited available shares, again and again, at sufficient levels to drive down the market price of the shares.
Thompson notes that of approximately $6 billion in outstanding failures-to-deliver existing on any day, “the Stock Borrow program is able to resolve about $1.1 billion … or about 20% [18 percent] of the total fail obligation.” In this statement, Thompson raises very serious questions about the integrity and operations of the NSCC and DTCC, which he can clarify by responding to the following queries: If the Stock Borrow program “resolves” only 18 percent of total fails, what is the disposition of the remaining 82 percent of outstanding fails? When failures-to-deliver occur that are not resolved through Stock Borrow, does the NSCC credit the undelivered shares to the member representing the buyer, creating genuine “phantom shares”? Finally, how many shares do the borrowing brokers, clearing firms and other participants in the Stock Borrow program owe the NSCC on a typical day, and what is their total value?
In a related matter, Thompson tries to distance the DTCC from charges that shares held in restricted accounts – for example, cash accounts, retirement accounts and many institutional accounts – are improperly lent through the Stock Borrow program by claiming that responsibility for segregating restricted shares from lendable shares falls to the “broker and bank members” of the DTCC, while responsibility for monitoring or regulating their performance in this matter falls to the stock exchanges and the SEC. As a trust company, the DTCC cannot hold that it has no role, duty or responsibility to ensure the probity of its operations. Thompson could address this issue by responding to the following queries: What procedures does the NSCC have to ensure that shares held in members’ accounts for possible loan through the NSCC Stock Borrow program are unencumbered by regulatory or legal restrictions from being pledged or assigned and eligible to be borrowed? On any given day, how many participants in the Stock Borrow program have lent shares that exceed their lendable shares, in what numbers and of what value?
Thompson also tries to distance the DTCC as far as possible from the naked short selling that generates most of the extended failures-to-deliver: “We don’t have any power or legal authority to regulate or stop short selling, naked or otherwise. We also have no power to force member firms to close out or resolve fails to deliver … we don’t even see whether a sale is short or not.” In fact, the DTCC chooses to not distinguish short sales from long sales, chooses to not regulate or stop extended naked short sales, and chooses to not force member firms to resolve protracted naked short sales.
First, Regulation SHO requires that all transactions be clearly marked short or long. If the DTCC and NSCC do not know whether sales are short or long as Thompson contends, they choose to not know. Second, the NSCC has a clear responsibility and adequate means to stop naked short sales of extended duration, with no legal barrier that would prevent them from so doing. As a trust company with an acknowledged duty to provide investors certainty in the settlement and clearance of equity transactions, the DTCC chose to carry out that duty by assuming the role of counterparty to both sides of every equity transaction, through the operations of the NSCC’s CNS system and the Stock Borrow program. By allowing short sellers to fail-to-deliver shares for months or even years, the NSCC clearly fails to provide certainty in settlement to the buyers, sellers and issuers of securities. Since it is widely known that extended naked short sales have been used to manipulate stock prices in cases of death-spiral financing, and the NSCC created the Stock Borrow program to address failures-to-deliver that prominently include naked short sales, the NSCC and DTCC share a responsibility with the SEC and the stock exchanges to protect investors by resolving extended fails.
Third, the DTCC and NSCC have the clear capacity to force member firms to resolve the extended failures-to-deliver of their customers by purchasing shares on the open market and deducting the cost from the member’s account. A 2003 study by Dr. Richard Evans and others provides evidence that forced buy-ins by any party occur very rarely. They found that a major options market maker who failed to deliver all or a portion of shares sold in 69,063 transactions in 1998-1999 was bought-in only 86 times or barely one-tenth of 1 percent of the fails. Thompson can clarify investors’ understanding of their operations by responding to the following query: What proportion of shares that are persistent fails-to-deliver, of one month or longer, are ever bought in?
Thompson acknowledges that the DTCC and NSCC know precisely how many failures-to-deliver exist for each stock and the precise duration of each of these fails. Yet, the DTCC refuses to disclose this information even to the issuer of the stock in question, which Thompson justifies by citing “NSCC rules” prohibiting such a release of data based on “the obvious reason that the trading data we receive could be used to manipulate the market, as well as reveal trading patterns of individual firms.” This response is both disingenuous and revealing. We know now, for the first time, that the DTCC has full knowledge of the extent of protracted, large-scale naked short sales in all particular cases. We also know now that the DTCC has had this information for at least a decade, since Thompson also notes that “fails, as a percentage of total trading, hasn’t changed in the last 10 years.” Yet, based on the DTCC’s own rules, it allowed these abuses to persist and fester. The DTCC and NSCC can change their rules at any time. Moreover, in this case, those rules are unjustified. Data documenting outstanding short sales in each stock are currently issued publicly, so further data on how many of those short sales are naked would not reveal additional information about the trading patterns of individual firms or in any way empower manipulators. In fact, the DTCC could substantially disarm manipulators by both publicly reporting naked short sales in each issue and pledging to force buy-ins of all naked short sales that persist for more than a limited period.
Surely, if large-scale, extended naked short sales have effectively created “phantom” shares, companies have a responsibility to their shareholders and the right to secure this information from the organization which manages the settlement of short sales. At a minimum, the DTCC should respond to requests by issuers for data on extended failures-to-deliver in their own stocks, both in the past and currently, so they can take steps to resist stock manipulators or bring them to account for past manipulation.
Thompson also claims that the DTCC did not create or manage the Stock Borrow program to serve its own financial interest, insisting that the service generates less than $2 million a year in direct fees to the DTCC and that all DTCC services are priced on a “not for profit” basis that seeks to match revenues with expenses. Without further information, these responses beg the question of whose private financial interest has been served by the Stock Borrow program, especially as the DTCC is owned by the stock markets, clearinghouses, brokerage and banking institutions that use its services. Thompson and the DTCC can clarify this serious matter by responding to the following queries: Do DTCC participant/owners receive interest or other payments through or from the Stock Borrow program for lending the shares of their customers and, if so, how much have they received for these activities over the last 10 years? Further, do DTCC participant/owners receive any dividend, interest or other payments or distributions from the DTCC or its subsidiaries?, Shapiro concluded.
In a recent editorial, Investrend Information head Gayle Essary questioned whether the board and principal shareholders would “be party to shenanigans that lead to the censorship or disabling of any media” that he says is “un-American activity.”
The DTCC’s letter to Investrend’s counsel, Marshal Shichtman, Esq., is posted at http://www.investrend.com/Admin/Topics/Articles/Resources/349_1113403487.pdf
Essary said that the arrogance the DTCC expressed in its censorship efforts shows that the entity has “become too large, too encompassing, too powerful, too unresponsive to those it serves, primarily the investing public, and too unresponsive to the Congress under whose auspices it should be operating.
“First, it is time to unconflict it, with real public representations on its board,” he said, and second, “it is time to break it up, with its various duties provided by smaller agencies under separate unconflicted boards.”
DTCC board members include 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); Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); and Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C), 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).
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