Replies to post #31583 on Cal-Bay International Inc (CBYI)

[stervc]

Phisherman, with your Reg SHO thoughts...

Thanks for keeping us on track here. Heck, your thoughts made me go back and do some further research. Hopefully this below makes it clearer for everyone. Some of it is a repeat from your DD, but with links.

http://www.nasdaqtrader.com/trader/news/2007/regulatoryalerts/ra2007-086.stm
The Securities and Exchange Commission (SEC) has amended Regulation SHO to eliminate the “grandfather provision” and will take effect on October 15, 2007.

SEC Regulation SHO sets out rules governing short sales, including the mandatory close-out requirement that applies to securities in which a substantial amount of fails to deliver have occurred (“threshold securities”). Clearing agency participants and broker-dealers for which they clear positions (“participants”) must take immediate action to close out a fail to deliver position in a Threshold Security that has lasted for 13 consecutive settlement days by purchasing securities of like kind and quantity (“close-out requirement”).

The amendment eliminates one of the exceptions to the Close-out Requirement for fails to deliver established prior to a security becoming a Threshold Security (“grandfather provision”). The amendment requires Participants to close out any previously-grandfathered fails to deliver in a security that is on the Threshold Security List on October 15th. The close-out must occur within 35 consecutive settlement days of October 15th. If a security becomes a Threshold Security after October 15th, all fails to deliver must be closed out within 13 consecutive settlement days.

Regulation SHO Threshold Security List
http://www.nasdaqtrader.com/aspx/regsho.aspx

Actual Regulation SHO Amendment
http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-15708.pdf

I'm a little rusty, but I think that since CBAY had their securities deregistered with the SEC a while back when they filed that Form 15 under Rule 15-12G, they will not be tracked for determining if they are a threshold security or not, just yet.

I am expecting that more filings will come out to make CBAY fully reporting again.

v/r
Sterling

[Terrorballs]

Where do you get that they will not have to cover just because they aren't on the threshold list for the 12th?

Because that means currently, there are not enough FTDs for them to be on that list. Which means they are not subject to the close-out requirements at all. Even if there is a naked short position here, it's not significant because if it was, we'd be on the threshold list. I'd also like to note that we're not on the list for the 15th, either.

Wouldn't we need to wait 5 days from the 15th to see if there where grandfathered shorts?

I think you're misunderstanding something here. "Grandfathered shorts" are the FTDs that occur before a security is on the threshold list. Prior to October 15th, only the FTDs issued after a security was on the threshold list had to be covered, whereas the ones issued before that never had to be covered. Now, the grandfathered shorts have to be covered too. Once again, this only applies for securities on the threshold list.

To summarize, CBAY is not on the threshold list, which means it has only a small naked short position, if it even has one at all. So even if these shares were covered it would make little difference.