Colorado Goldfields Inc. (fka CGFI)

[lesgetrich]

"- And of course I remain curious how you can short a stock like this, no one has ever answered which brokerage firm I can go to and short this stock"

I have a Series 6 license (allows me to trade mutual funds) and had to learn most of this but unfortunately I've forgotten a lot. Broker-Dealers can do short sales even if you can't find one who'll do one for you. As I said before, I suspect you could execute a short sale with a Trade Station account.

Nevertheless, anyone with a securities (Series 7) license can register as a Broker Dealer. They would have to incorporate and register with FINRA and their state securities regulator (each state has different licensing requirements). When a Broker Dealer operates as a broker he buys and sells securities for others. When he operates as a dealer he buys and sells securities for his own account. There is no requirement that he operate in both capacities. If a dealer buys and sells the same security he is considered a market maker.

Broker Dealers must conduct business with a high standard of ethics and be members of an SRO (Securities Regulatory Organization) - in this case FINRA. Among other things, "the SRO rules also include a duty of best execution. For example, FINRA members must use "reasonable diligence" to determine the best market for a security and buy or sell the security in that market, so that the price to the customer is as favorable as possible under prevailing market conditions."

The following information can be found at this link:

Guide to Broker-Dealer Registration

6. Restrictions on Short Sales (Regulation SHO)

A "short sale" is generally a sale of a security that the seller doesn't own or for which the seller delivers borrowed shares. Regulation SHO was adopted in 2004 to update short sale regulation in light of numerous market developments since short sale regulation was first adopted in 1938. Compliance with Regulation SHO began on January 3, 2005. Some of the goals of Regulation SHO include:

Establishing uniform "locate" and "close-out" requirements in order to address problems associated with failures to deliver, including potentially abusive "naked" short selling.

Locate Requirement: Regulation SHO requires a broker-dealer to have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due before effecting a short sale order in any equity security. This "locate" must be made and documented prior to effecting the short sale. Market makers engaged in bona fide market making are exempted from the "locate" requirement.

"Close-out" Requirement: Regulation SHO imposes additional delivery requirements on broker-dealers for securities in which there are a relatively substantial number of extended delivery failures at a registered clearing agency ("threshold securities"). For instance, with limited exception, Regulation SHO requires brokers and dealers that are participants of a registered clearing agency to take action to "close-out" failure-to-deliver positions ("open fails") in threshold securities that have persisted for 13 consecutive settlement days. Closing out requires the broker or dealer to purchase securities of like kind and quantity. Until the position is closed out, the broker or dealer and any broker or dealer for which it clears transactions (for example, an introducing broker) may not effect further short sales in that threshold security without borrowing or entering into a bona fide agreement to borrow the security (known as the "pre-borrowing" requirement).

Creating uniform order marking requirements for sales of all equity securities. This means that a broker-dealer must mark orders as "long" or "short."

For further information, please see the adopting release for Regulation SHO, as well as Frequently Asked Questions, Key Points, and other related materials at http://www.sec.gov/spotlight/shortsales.htm.