Microbiological Waste fka MBWS

[34Simmons]

Friends,

Well it almost happened. We almost got to a point of recognition where the Securities regulators were going to take responsibility and action against those that have violated our trust. But then they flinched. Today it was the National Association of Securities Dealers (NASD) who flinched on behalf of the member firms.

Today the NASD, in an action inexcusable to every investor who has put money into the 3500 Bulletin Board and Pink Sheet stocks, provided an extension to their proposed regulation change that would plug a “Loophole” used to manipulate our stocks (http://www.nasdr.com/pdf-text/0408ntm.txt) . They extended the time allotment for the member firms to be in compliance with a Reg. 3340 change that would prohibit offshore shorting abuses highlighted in SEC Regulation SHO proposal ( http://www.nasdr.com/pdf-text/0403ntm.txt ). The result of this “extension from February 20th to April 1st was an abrupt change to the Market and massive selling on these stocks. Many stocks dropped their market caps by 20% within the first hour of this notice being published.

Now what was this loophole? The NASD, in 2001 submitted a regulation change that required all member firms to be responsible for the affirmative determination of all short sales executed by non-member firms. Affirmative determination being the ability to locate and borrow a share for settlement on a short sale. Member firms have always been required to meet affirmative determination but non member firms (offshore firms) have never had this obligation and have thus “naked shorted” US stocks into oblivion without US regulatory protection. Shorting that the SEC, in Regulation SHO proposal, has accounted for short sale settlement failures that exceed the total number of shares registered by the company. Canadian compliance officers admit that not only is this very lucrative to the offshore firms but is a “huge problem” in the US (http://globeinvestor.com/servlet/ArticleNews/story/GAM/20040216/RREG16/stocks/news?ba ) .

So, we ask why this extension is so important.

First, the extension allows the loophole to continue to persist for an additional 45 days. The NASD has elected that it was better to allow the fraud to continue, for the loophole to exist, than to deal with some minor back office issues that may arise by those firms that did not react to their compliance requirements. The NASD wants the member firms protected over the rights of the investors who continue to be abused by a loophole that was identified in 2001.

Second. The extension provides additional evidence of the conflict of interest that exists between SRO and the member firms of Wall Street. The SEC, NASD, Department of Justice, US Postal Service, North American Securities Administration association (NASAA), Senate Banking Committee, and House Financial Services have all admitted this problem is huge. The naked shorting issue and the settlement failures on the books of our broker dealers have created such problems that settling the books could put some firms out of business. The NASAA, in a comment letter to the SEC for Regulation SHO (http://www.sec.gov/rules/proposed/s72303/nasaa010504.htm), has identified that investors and companies have been victimized by this abuse. The Senate Banking Committee has identified that the SEC and NASD have created a joint task force to address the issue. The DOJ and USPS have issued arrest warrants against stock manipulators and have recorded tapes of these manipulators bribing brokers to collapse stocks (http://www.rgm.com/articles/sedona.html) . To it all, each has failed to move reforms or stop the abuse. No member firm, no broker, has ever paid a fine or been charged for their actions. Instead the NASD provides extensions to allow them time. Time that works against the investor and for the member firm.

Chairman Donaldson claims he has a pulse on the issues and his team is working hard to correct them. The NASD has claimed that they are well managed and are not conflicted between member interests and investor interests. Both are deceiving us as their actions speak louder than their words. This problem demonstrates the values that the NASD and SEC put on the small investor when it comes to protecting the small investor at the expense of Big Business Wall Street. Big Business Wall Street that runs the NASD and big Business Wall Street that Chairman Donaldson came from.

What is naked shorting?

Naked shorting is a process where unregistered shares are floated into the market on a short sale. The sale is never settled as the seller has no way or intention of finding a share for settlement. In 1996 – 2000 the SEC and FBI investigated an offshore firm that was deeply involved in money laundering US organized crime money (http://www.rgm.com/articles/cornucopiaofcrooks.html) through naked shorting. To remedy this problem the SEC and NASD spoke in front of Congress in September of 2000 (http://www.sec.gov/news/testimony/ts142000.htm , http://www.nasdr.com/1420/goldsmith_04.asp ) but to find the regulatory or enforcement actions taken off these sessions would find you remiss as NONE have taken place.

The Senate Banking Committee, in 2003, started to come down hard on the SEC for evidence they were provided on this issue. An issue the SEC had no intention of addressing. The result of 1 year of prodding was a reform package 9regulation SHO0 that sits idle in the hands of SEC rule makers. The need to address an issue that steals from US investors and places those monies into the hands of criminal elements and member firms is not high on the priority list of an agency dedicated to “Big Business”. Instead of addressing the issue the SEC has allowed it to get further out of control. A problem grown to proportions no longer manageable.

The remedy to fraud is simple. Provide restitution to those that commit the crimes and put that restitution directly into the hands of the abused. Find a way to do it where the lawyers are not the winners but the abused are. That remedy is simply. FORCE SETTLEMENT of all trades and clean up the books that have gotten so out of control. Those firms with really bad books will pay the most in forced buy-ins and those that stayed relatively clean will come away unfazed. The buy-ins will drive stock values up and those abused will convert their losses into recovery and/or profits. What better way to provide restitution to the proper parties? The problem is, The SEC and NASD would rather protect the Brokers and the criminal elements that drive revenues to the Wall Street firms. The investors are the collateral damage in all of this.

Wall street is once again embroiled in corruption. This time the question is, are Wall Street regulators covering up this crime and should they be held criminally liable for their actions? Where is the indictments against the Wall Street firms bribed to abuse these stocks and where are the actions against firms that profit on commissions for trades they never settle?


www.investigatethesec.com