GLUV Corp (fka GVRP)

[WTMHouston]

<<Rule 203 requires a "Hard to Borrow" list.>>

Other than what I read in what you posted, I have not studied Rule 203. But, that said, the stuff you posted does not require a "Hard to Borrow" list.

"Broker-dealers create "Hard to Borrow" lists to identify securities that are in limited supply. Thus, locates for securities on "Hard to Borrow" lists are likely to be difficult. However, the fact that a particular lender placed certain securities on a "Hard to Borrow" list cannot be taken to mean that the lender represents that securities that are not on the "Hard to Borrow" list are easy to borrow. Commenters viewed "Hard to Borrow" lists with circumspection,63 and we understand that such lists are not widely used by broker-dealers. Therefore, the fact that a security is not on a hard to borrow list cannot satisfy the "reasonable grounds" test of Rule 203(b)(1)(ii)."

It may be that the securities (3 million shares according to the GVRP press release) showed up in someone's account because either the company or the transfer agent screwed up. If this account was governed by a form agreement that provided that absent express restriction of the securities being available for short borrowing, the broker could lend them, then it may have appeared that they were available for the broker to take a short position. The securities could have been in the account with legal restrictions (although they should not have been distributed until the payable date) and the broker did not notice or check into whether they were restricted.

I would bet that (and this is just speculation) that there were no restrictions on them and that they were, inadvertently or otherwise, transferred when they should not have been, either by a company authorization or a screw up at the transfer agent, so that they showed up in the relevant account as unrestricted securities and thus seemed to be available for borrowing or sale.