You just made up this quote.
There is no restriction to short selling because of the % of daily short volume.
It says explicitly that "
The use of fictitious Mullen shares by Defendants and the John Doe
Defendants that were not authorized for short-selling caused the daily short-selling
of Mullen shares to frequently exceed 55% of the daily trading volume of Mullen’s
shares during the Relevant Period when the industry norm is daily short-selling
between 25% and 30%."
The fictitious shares are not authorized for short-selling; nowhere does it say anything about the restriction to short-selling because of the % of daily short volume. The defendant did not properly locate these shares, they used shares from customer accounts that were fully paid for, not margin accounts, and also, 55% of the daily trading volume of Mullin was short-selling. I know you will say that most of the daily short volumes are longs, but we are talking about short selling, not short volume %. The broker must have a "locate" for the security before executing a short sale. They can't just willy-nilly shares from a customer account when said customer has the do not loan my shares button on, and the shares are fully paid for,
39. Under SEC Rule 15c3-3, the Defendants were required to maintain
Good Custody and Control of customers’ holdings of Mullen stock, by segregating
those shares and restricting their use for general firm purposes, including short
selling. Despite the requirement to safeguard these Mullen shares, the Defendants
either lent these customers’ shares to other market participants (i.e., broker-dealers
and hedge funds) to cover their own short sales for a borrowing fee or for
Defendants’ own proprietary accounts short selling or both. Had the Defendants
not used Mullen shares belonging to customers to cover short sales, the short
sellers, either the Defendants themselves or the borrowers they lent to, would have
“Failed” or been unable to deliver shares when settling the trades in violation of
Reg SHO.
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