Nope.
First the rule is for specific stocks - investment banks and fannie/freddie mac.
Second, TIV's naked short position may be entirely legal. Don't forget naked shorting is legal in certain situations, including naked shorting by specialists and market makers. This is done to ensure orderly markets and narrower spreads. If specialists and market makers weren't allowed to short (which is frequently naked shorting since locating would make each trade take forever) the markets would be highly volatile and much less liquid particularly for low volume stocks like TIV. When spoecialists and MM's short they're not doing it because they are betting on the stock going down, rather they are facilitating a customer's long trade. Specialists and MM's hope to cover via another customer's sell transaction. They make their profits on the bid/ask spread. (I laugh when people claim TIV's specialist is in "cahoots" with the shorts because he isn't. In fact he could care less if the stock goes up or down, rather he would just prefer the volume pick up.)
TIV's naked short position is very likely due to the specialist facilitating long purchases during the R2K run. He provided liquidity to index funds so they could buy in the sizes they needed to, was unable to match that with sellers at the same time and as a result has been left with a net short position. My bet is he is currently unwinding that position now (which, I bet, is whythe stock continues to rise for no reason).
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