Spongetech Delivery Systems, Inc. (fka SPNGQ)

[crashman]

When Bill Young tells fairy tales about 1.5 billion naked shorts from Singapore (I'm now glad I forwarded that info to the SEC), he is forgetting that the smart trader/investor actually reads the SECs web site:

Question 1.3: How does Regulation SHO apply to overseas transactions?

Answer: Footnote 54 of the Adopting Release states that any broker-dealer using the United States jurisdictional means to effect short sales in securities traded in the United States are subject to Regulation SHO, regardless of whether the broker-dealer is registered with the Commission or relying on an exemption from registration. The Proposing Release explains that short sale regulation applies to trades in reported securities when the trades are agreed to in the United States, even if the trades are booked overseas. (68 FR at 62997 and 62998). Whether a short sale is executed or agreed to in the United States will depend on the particular facts and circumstances of the transaction. The Proposing Release provides some examples of when we would consider a short sale to have been agreed to in the United States. (68 FR at 62997 and 62998). For further information about how the provisions of Regulation SHO may apply to overseas transactions, please refer to Question 4.6.

Question 4.6: May a U.S. broker-dealer that executes orders on behalf of a foreign broker-dealer rely on a locate by such foreign broker-dealer in the same way that the U.S. broker-dealer may rely on a locate by a U.S. broker-dealer or customer?

Answer: Rule 203(b)(1)(ii) permits a broker or dealer to accept a short sale order in an equity security if the broker-dealer has reasonable grounds to believe that the security can be borrowed so that it can be delivered on the settlement date. The U.S. broker-dealer may rely on a locate of a foreign broker-dealer in the same way that the U.S. broker-dealer may rely on a locate of a U.S. broker-dealer or customer: the facts and circumstances must provide a basis for a reasonable belief that the security will be available for delivery on the settlement date.

Moreover, the locate information must be documented. Consistent with Footnote 58 of the Adopting Release, the documentation should include the source of the securities given by the foreign broker-dealer as the basis for the locate and support for the reasonableness of the reliance on the foreign broker-dealer. For further information about how the provisions of Regulation SHO may apply to overseas transactions, please refer to Question 1.3.

http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm