Posted by: "Allan J. Kvasnicka", CIGX_VIPGROUP
From>Edmund Stephen
To: > See Below
Sent: Wednesday, June 22, 2016 3:16 PM
Posted by: "Allan J. Kvasnicka"
Subject: A matter of importance
This is the final version of what I sent FINRA and The SEC and FL Senators and Congressman
June 22, 2016
FINRA
Richard G. Ketchum, Chairman and CEO Thomas Gira, Executive VP, Market Regulation Susan F. Axelrod, Executive VP Regulatory Operations
CC:
Securities and Exchange Commission Mary Jo White Chairman Andrew Ceresney, Director of the Division of Enforcement Stephen Luparello, Director of the Division of Trading and Markets
Senator Bill Nelson, US Senate Senator Marco Rubio, US Senate Congressman Alan Grayson US Congress
Dear Sirs and Madame;
I am writing you about a serious matter that affects millions of investors and one that has been a well-known grievance that has gone unaddressed for too many years. It is the ability of a sinister group of mostly institutional investors with high-speed computers, elaborate algorithms and superior capital to by-pass rules about shorting, delivering stock and in many cases collusion to destroy new companies who require access to our capital markets to fund their research and growth. This is especially true in the biotech area where research and lengthy regulatory procedures are particularly costly. These hedge funds (and others) can decide the winners and losers by shorting the companies’ stocks to levels that make funding impossible, irrespective of the merits of the science or business. If this were done in a legal way, one might say that the strong should survive, but, as I mentioned, these predators are able to operate around the rules affecting shorting, delivering stock and even collusion. Unfortunately, regulators do little to enforce existing rules, and the result is that some companies end up with millions of shares being traded that are unauthorized, unissued and sold illegally. This means that the perpetrators are literally creating counterfeit shares. This may not come as a surprise to anyone who follows these things closely. The real surprise is that our regulators, whose primary responsibility is to protect the public and to insure orderly markets, seem to be disinclined to do anything about it.
Earlier this month, I wrote the “whistleblower” department of FINRA (my letter follows) about a stock I own that has been a victim of this criminal activity. I was asked for specifics, even though the stock’s trading volume had gone from 88,000 shares a day to over 32,000,000 shares a day in a month and a half (a 36,000% increase and more shares daily than the company had outstanding) and the price was down 98%. The “details” he seeks are embedded in the trading desks and back offices of the firms making markets in the stocks and the institutions “trading” the stock, where I have no access but the regulators, should they decide to enforce the rules, do. I know that they will find that there are many millions of “naked short” shares that have been outstanding for years. I don’t know if anything will come of my complaint, and I know that I shouldn’t expect any follow-up, that’s the untransparent world in which these matters are handled. But there is a far bigger issue involved here, and that’s why I am writing a broader audience. Do we really want to allow winners and losers to be decided in a rigged market? How many biotech companies with wonderful life-saving or life-improving ideas have been destroyed by a handful of greedy (and politically connected) hedge funds able to operate outside the rules? This isn’t just bad business, it has absolutely life-altering consequences, and it is happening every day!
You. the people I have addressed above can make a difference. It is within your power to finally put an end to this illegal activity. Are you willing to address this issue that hurts so many millions of the investors you are empowered to protect? If you are unaware that it is happening, a quick check of “street-savvy” contacts will confirm its wide-spread existence.
I have included in this letter my Congressman and the two senators from Florida for several reasons. First, you are my representatives. Second, the company at issue is headquartered in Florida, and thirdly, you have many constituents in Florida who are retired, invest in the markets and have been victimized by these crimes. I should also add, that as seniors, we are most affected when promising new medicines can never make it past this criminal activity. I will be sending copies of this letter to other members of Congress who have oversight responsibilities.
Sincerely,
Edmund A. Stephan, Jr. Kissimmee,FL 863
My Letter written to FINRA on June 7, 2016
. Dear Sir or Madame:
I am writing about what I see as collusive and manipulative activity in the trading of the common stock of Rock creek Pharmaceuticals (RCPI) over the past three months. This manipulation has occurred while the stock declined 98% and saw its daily volume increase as follows:
March 1.9 Million shares 88.000 shares a day
April 4.4 million shares 212,000 shares a day
May 150 million shares 7,000,000 shares a day
June (first 4 days) 128 million shares 32,000,000 shares a day
In just over two months, the daily volume has gone from 88,000 shares a day to 32,000,000 shares a day up 363 times or a 36,000% increase. During this period, the stock has declined from $.50 to $.011.
The company has fewer than 30 million shares outstanding, so that, on some days it is trading more than the entire number of outstanding shares, and many times its “float.” On Thursday of last week, it traded almost two times the number of outstanding shares. During the period in question, reported institutional liquidations have been minimal and no one has reported a new 5% position. Clearly we can attribute the volume increases to institutions’ manipulative “painting the tape.” This has been predatory and I believe collusive activity and is deserving of a full regulatory investigation. I would suggest a trading halt to balance everyone’s books AND to require sellers to abide by mandatory delivery rules which seem to have been utterly ignored in this situation.
Among the most aggressive sellers (shorters?) have been Maxim Group (MAXM), Knight Capital Group NITE) and Cantor Fitzgerald (CANT).
Biotech companies by their very nature need regular access to capital markets to finance their research and their expensive and lengthy regulatory process. If we allow a small group of predatory institutions with fancy algorithms and high-speed computer access working in total disregard of shorting, delivery and illegal-pool regulations to select winners and losers at the expense of the public and start-up companies, then something is wrong with the system and its requirement to maintain “orderly markets.” I do hope that you will exercise your regulatory authority and look into this matter.
Sincerely,
Edmund A. Stephan, Jr.
Disclosure: I am retired from the securities industry. I am a shareholder of RCPI
