MONEYMADE: DAYTRADER

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SEC Inspector General to Audit Naked Short Selling Investigations
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Posted May 08, 2008 3:15PM PST
The Office of the Inspector General of the Securities and Exchange Commission is going forward with an audit of how the commission has investigated allegations of naked short selling, according to a person familiar with the situation.

The audit, which is starting this week, will look into the process the SEC's Division of Enforcement uses in responding to naked short selling complaints and referrals.

Investor advocates have argued that naked short selling, where short sellers don't borrow or deliver the stock that they've sold, has been damaging to small cap companies.

The inspector general's office, which conducts internal investigations of the SEC, will be coordinating with the Government Accountability Office. GAO officials said in April that they would conduct their own probe of the SEC's response to the issue of stock-delivery failures. The GAO investigates government agencies on behalf of Congress.



SEC Nominee Has Advocated for Light Regulation of Hedge Funds
Posted May 07, 2008 2:45PM PST
President Bush intends to nominate Troy Paredes, a law professor who has advocated for relatively light regulation of hedge funds, to the Securities and Exchange Commission.

The White House announced Paredes as the prospective replacement for Republican Commission Paul Atkins in a May 6 statement. Paredes's five-year term on the SEC would begin June 6.

Paredes is currently a law professor at the Washington University in St. Louis.

In May 2007, he authored a paper entitled "Hedge Funds and the SEC: Observations on the How and Why of Securities Regulation." The paper suggested that the SEC could encourage better practices by hedge funds by advocating for them, rather than by making new rules.

"The SEC could express its view of best practices without imposing legal requirements," he wrote. "Imagine the potential impact on the industry if the SEC chairman, particularly if joined by other commissioners and the directors of the Divisions of Investment Management and Corporation Finance, pushed a set of hedge fund best practices in a series of speeches, interviews, and op-eds in publications such as the Wall Street Journal and the Financial Times."

The day after Paredes's nomination was announced, the SEC said that Alexander Cohen, the commission's current deputy general counsel for legal policy and administrative practice, will be appointed the SEC's deputy chief of staff, effective May 9.