Replies to post #5944 on Cytogenix (fka CYGX)

[sukycospito]

I followed CYPT for awhile and IMO they were attacked in the manner described. Was really ugly. Sounds to me like a good development.

[Ignutz]

SEC offers no effective deterrent to stock fraud.

NASD wrist slaps firm accused of Naked Shorting

We are barely 3 months past the NASD's new Rule 3370 Affirmative
Determination laws and what has changed? Apparently little as the July enforcement actions by the NASD include a SLAP ON THE WRIST fine for failing to make affirmative determination on short sales to insure proper settlement of that trade. The $15,000 fine may or may not be equal to commissions made in the execution of these orders but, more importantly, the fine certainly appears to be worth the risk. Failure to make Affirmative Determination and to properly settle these trades is acting as a co-conspirator to naked shorting for the client.

The SEC, on June 23, 2004 stated unequivocally that 4% of all publicly traded companies have harmful settlement failures attached to that stocks true public float. Those settlement failures can and do exceed the entire public float of some companies. What affect does that have on shareholders and their investments? It dilutes their holdings and depresses stock values. Investments made based on stock structures becomes meaningless as the true stock structure of these companies, as recorded, is mere fractions of the true shares in circulation.

So, with the NASD putting in place Rule 3370, with the SEC staking claims to their new proposal as the means to the end to this abuse, you have to wonder about the Industry. Clearly they do not get the message and clearly the fines we impose are worth the risks of violations. The SEC and NASD have refused to force settlement of trades executed which fail, including these trades that Track Data Securities initiated, but instead allow these failures to add up and accumulate against long investor interests.

The time is now to start the enforcement of the Securities Act of 1934. The Act is very specific (Section 17A) in the requirement for prompt and accurate clearance and settlement of trades. Those that are in violation should be suspended from operations until such point in time as to when they can show policies and compliance to this requirement. The NASD can initiate this suspension under NASD rule IM-3130 section (6).

The NASD and SEC identify naked shorting as abusive and manipulative.

Failure to properly address the issue with stiff fines and sanctions,
including forced settlements, will only allow the industry to continue with this abuse and manipulation on the investing public. The NASD would say that I should be happy this action was taken but, as I read their monthly reports, this is typical action and fines imposed yet the root behavioral issue remains unchanged. You don't stop a habitual speeder with continued warnings. The Industry has had it's warnings, it is time to flex the muscles.


Dave Patch
www.investigatethesec.com