NAKED SHORTING TARGETED - NY Post re: DTCC subpoenaed
By RODDY BOYD
February 16, 2006 -- Two state securities regulators have issued subpoenas to get at the trading records of Wall Street's largest firms in a quest to stamp out the controversial practice of naked short-selling, sources said.
Naked shorting — the tactic of selling shares short without properly borrowing them first in order to bet on a stock's fall — has been a concern of state securities regulators during the past year.
Utah and Connecticut regulators' first line of attack will be to get Wall Street firms' trading records via the Depository Trust & Clearing Corporation, which tracks and settles all stock trades. Regulators will be looking for the trading and customer ledgers of Bear Stearns, Morgan Stanley and Goldman Sachs, which all have large and highly lucrative clearance operations.
Connecticut's subpoena asked for information on four companies "with a strong connection to the state," sources said.
Utah, on the other hand, requested a large amount of market-wide data regarding alleged naked short sales.
A Utah securities spokesman declined comment.
Connecticut's top securities watchdog, Ralph Lambiase, said small companies vulnerable to stock-price manipulation via naked short-selling often lose their ability to get additional financing if their shares fall below $5, he told The Post.
Many of the companies purportedly under attack from naked short-sellers are often under either intense regulatory scrutiny or have posted abysmal performance for long periods of time.
www.nypost.com/business/61958.htm
