Radar Watch Companies

[mick]

thank you lots,,,now fer naked short stuff. By Robert J. Flaherty
mr.flaherty is very sharp person
http://www.flahertyfinancialnews.com

Is Mary The One?
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Is SEC's Mary Shapiro the One? TIV is near Oxy's big discovery. Dan Lufkin Backs MELA. Nick's Picks! WESCX's Nick Galluccio has a good quarter plus 180 Explosive Small Caps with a technology growth tilt.

Perhaps because the first SEC Chairman Joe Kennedy was a feared short seller and the agency from the start worked with shorts to police the market, the SEC has tended to overlook the havoc wrought by the abusers among their favorite tipsters.
So the public and individual investors have suffered from this laxity. In a great one day crash Goldman Sachs ignored the uptick rule in hammering down the stock market so much so that market limits for one day selling had to be imposed by the New York Stock Exchange. But the damage to the economy could not be erased.

Hedge funds turned thousands of promising emerging growth companies into zombies with crippling toxic convertibles, often created by related naked short selling. Companies of all sizes have been badly hurt by naked short selling, which is simply selling shares which were not borrowed as the law requires. This permitted abusive shorts to market cap a particular stock price by selling unlimited shares whenever good news came out or a stock rose. The relentless deluges discouraged prospective investors and caused old faithful ones to give up. Many valiant efforts in the medical field were ended because abusive shorting made it impossible to raise new capital. Only last fall when large Wall Street investment banks were themselves targeted did the SEC act and slapped on a temporary ban as some of the pillars of capitalism were showing cracks.

At the same time, after decades of neglect, the SEC started policing the SHO fails to deliver shares on time list and naked shorting selling has shrunk dramatically. Better late than never. Still hedge funds do go offshore to do naked shorting and other mischief. About July 27 the SEC made the ban on naked short selling permanent and promised more transparency on trading velocity and volume. However, the SEC dropped a potentially useful requirement that hedge funds disclose details of individual short positions to regulators. This means the SEC will not have an early heads up about the activities of some short sellers. For example, along with many others, media favorite Mark Cuban's bearish bets have some times popped up on SHO the fails to deliver shares on time list in the past. InterOil Corp. (NYSE:IOC-26.99) and UTEX Corp. (NYSEAMEX-5.04) are two that come to mind.

Worst of all, abusive shorts in reformers' clothing earlier also conned the agency into getting rid of the uptick rule. This was prudently installed in the Depression to keep shorts from continuously hammering down the price of a target stock. In spite of pleas from some of Wall Street's wisest like Muriel Siebert, Mario Gabelli and Jim Cramer, the SEC still lets the market cappers do their evil without a new uptick rule to interrupt their continuous selling. Online abusive short sellers also use numerous anonymous handles to disparage stocks and orchestrate investor fears. In an age of transparency abusive secret short sellers should become an endangered species.

So when new SEC Chair Mary Schapiro spoke in June at the New York Financial Writers Association Annual Awards Dinner where this year's winner was Fortune's Alan Sloan, I slipped old friend and MC for the night Mike Kandel my question, " Do you want to be the SEC Chairman who finally ends abusive short selling?"

"Sure!" she answered so quickly the audience laughed. While short selling was not near the top of her list of the problems she felt she would have to face, she was surprised that as new SEC Chair "It has been the Number One issue in terms of interest from the media, interest from the public and interest from Congress."

In response, the SEC has proposed different approaches to improve the situation. One move being studied is restoring but also modernizing the uptick rule to fit our age of mini decimal trading. The SEC also has worked to eliminate late delivery of shares which is why naked short selling has dramatically fallen.

Four years ago in summer of 2005 Fred Scaglione, crusading editor of NY Non Profit Press in one of my last issues as owner of Equities Magazine, free lanced an expose on three atrocious toxic convertibles related to NIR Group of Roslyn, NY. We were complimented by receiving a death threat. On July 24, 2009 the Wall Street Journal reported the FBI and the SEC have finally launched an investigation into some of NIR's practices. It is nice to be four years early but if the SEC had been actively policing abusive short selling we wouldn't have been.

Legitimate short selling benefits the stock market, but market-capping abusers make the job-creating role of the entrepreneur and raising new capital much more difficult and often make the difference between success and failure. Good luck, Mary, in improving a serious situation.