I don't think Monk's FLD scheme was technically illegal under the referenced SEC Reg SHO document since it clearly states there that companies not fully reporting (most pink sheet companies) are not subject to those regulations. They cannot be put on the threshold list forcing the short positions to be closed out. For a fully reporting company a FLD would be illegal. On EIGH, a FLD appears to be at least ethically questionable. If there were naked shorts from the MMs, they were never required to close them out. I don't see how there could have been a short squeeze--in fact, there never was. Any MM naked shorts would just sit there until they could close them after investor confidence crumbled. JMHO.
Following are a couple of quotes from Reg. SHO:
"Threshold securities only include issuers registered or required to file reports with the Commission ("reporting companies").17 Therefore, securities of issuers that are not registered or required to file reports with the Commission, which includes the majority of issuers on the Pink Sheets,18 cannot be threshold securities."
"Although Regulation SHO's locate provision applies to all equity securities, the close-out provisions and inclusion on a threshold securities list apply only to equity securities of companies required to register or file reports with the Commission ("reporting companies").32 As described above, reporting companies typically trade on an exchange or are quoted on the Nasdaq or OTCBB. Only some reporting companies are quoted on the Pink Sheets.33 Regulation SHO is limited to reporting companies because of the difficulty in obtaining accurate total shares outstanding data for non-reporting companies
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