No I don't think that is true given the basic assumptions.
There will be trails of your $$$ deposits to a brokerage account. There are transaction reports in your account that can be downloaded or mailed to you. Plus, there are your monthly statements from the brokerage. Brokers who naked short and then try to say you never had the shares later on would be hard-pressed to deny a paper trail. If they created false sell orders, they would somehow have to prove you had the money from it.
If, as you suggest the brokers can lie about there being real shares in your account they can just as easily lie about other transactions. They never have to show you got any money, all they have to show is that you moved your portfolio from one stock to another. They could generate a false trail of buy and sell orders that leave you with a series of 'losses' and a few worthless shares from some other company in your account.
My contention is the logic breaks down as soon as you assume your broker is crooked. The dilemma is inescapable, if the broker is willing to cheat you by falsifying records then you cannot expect him to make anything good when the conditions change.
In this case it doesn't matter if the crooks are the brokers the MMs or the company itself, there doesn't seem to be any possible outcome that is beneficial to the investors.
(My last post of the day as I am limited to three a day.)
