Regulation SHO Appears To Be Regulation SHO What
Source: OTC Jpurnal
The early reviews on Regulation SHO are in, and they are not favorable. According to some of the reviews I have read in the media recently, Regulation SHO seems to be turning into Regulation SHO What- meaning the SEC is just playing lip service to the many companies and shareholders who have been bitterly complaining about the widespread practice of illegal naked short selling. Read the January 4th edition for some background if you are not familiar with the issue.
According to David Patch who edits the "StockGate" electronic newsletter, there were originally 374 stocks on the Threshold list. Inexplicably, the vast majority simply disappeared. 110 are now left. Click Here to view the most current version of the list. Nearly every microcap company on the Bulletin Board and in the Pink Sheets that was originally on the list has now mysteriously disappeared.
Lending credibility to the entire issue was a paper recently published by University of New Mexico Professor Leslie Boni, which was initiated while the author was visiting financial economist at the SEC.
According to Professor Boni's findings, 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC's threshold limits for failures.
The media is calling the growing evidence of widespread abuse within the system as "StockGate", and some heavy legal entities are throwing their weight into the fight.
A consortium of law firms has now filed over 20 civil cases. The law firms include O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. This group of firms is well known for the gigantic awards they have been able to garner from the Tobacco industry.
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
According to the law suits, the DTC is at the heart of the problem. The DTC is the electronic clearing exchange that handles the electronic transfer of shares from one firm to another. The suits allege DTC has an inherent conflict of interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in a "Stock Borrow Program."
Most of the information in today's edition was gleaned from an article published yesterday in the online version of Investors Business Daily. It makes for fascinating reading. Click Here to read the article.
The DTC is owned jointly by the NASDAQ and the New York Stock Exchange. If billions in revenues are in fact being generated by the DTC for allowing failures to deliver, the law suits will eventually uncover the ugly truth.
In the interim, NBC's Dateline is rumored to be preparing a major expose on the issue, and activists in the growing StockGate scandal are trying to recruit Eliot Spitzer to help in the investigation. Stay tuned: This is getting exciting.
