They have 3 days to cover those NSS otherwise they become Faked shares for ever ....I wonder if they really cover those shares or the broker does itself "the clearing" and tricking the system!!!
Your explanation is what ougth to be but it doesnt happen necessarily that way!!!. Check the post related to ETRade today in this board. FINRA found out ETRD was hidding shorting and not reporting it. They only Fined the MM however NSS is illegal after the third day but crooks know how to override rules . The system is way corrupted SEC ,FINRA, DTCC all in the same boat working for the Banksters = Wall Street Mafia.
Kids learnt early they cant hide the sun with a thumb!