It's all coming to bare...at any moment when you least expect it. They won't even knock in DKAM's case. Just blow up their place of operations.
"Yep, I'm a trader. I break the law daily. But I am exempt because we are part of a hedge fund and we send our orders daily to market makers who we pay handsomely for the privilege of helping us break the law!"
WASHINGTON (Dow Jones)--Facing criticism over lax regulation of short-selling, the U.S. Securities and Exchange Commission announced Wednesday it took enforcement action for the first time against two options traders and their brokers for abusive "naked" short-selling. The SEC filed administrative charges against New York City-based Hazan Capital Management LLC and its majority owner Steven M. Hazan. Separate administrative charges were also filed against Chicago-based TJM Proprietary Trading LLC and TJM trader Michael R. Benson. TJM's chief operating officer, John T. Burke, was also charged administratively for failing to supervise Benson. The firms and people charged agreed to settle the case without admitting or denying the allegations. Short-selling, or borrowing and then selling shares in the hope the stock price will fall, has been blamed by many for driving down the shares of financial stocks. Of particular concern to some critics is naked short-selling, in which investors sell the stock without first borrowing the shares. The SEC charged the traders and their brokers with violating an interim naked short-selling rule that was officially made permanent last week. It requires broker-dealers to purchase or borrow securities to deliver on a short sale by a specified date. The SEC alleges that the traders and their firms wrongfully claimed they were entitled to a market maker exception to avoid locating shares prior to the execution of a short sale. They then tried to make it appear as though they were complying with the close-out requirement, but in fact were not entitled to any exceptions and were not in compliance, the SEC said. "These traders and their firms engaged in short-selling tactics that circumvented regulatory requirements through complex options transactions," said Scott W. Friestad, the associate director of the SEC's enforcement division. -By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com (END) Dow Jones NewswiresAugust 05, 2009 15:32 ET (19:32 GMT)
