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"....make note of a defrauding practice that is currently
occuring within our securities markets. This is, namely, the manipulation of
stocks on the Over the Counter (OTC) market.
Currently, the Market Makers in these markets are charged with making orderly
markets, and with smoothing out trade flows in order to allow for the timely
execution of orders to purchase and sell stocks. To this end, they are allowed
by the SEC to sell shares that they do not own, in order to buy them when the
shares are more avilable a short time later. In theory, this makes for fluid,
orderly markets that do not have unusual price spikes or dips due to momentary
halts in the fluidity of the stock.
The practice of the Market Makers though, has abused this ability, and is
causing the loss of many investment dollars. The MM's (Market Makers), because
they can control both the flow and the price of a stock, have gotten into the
habit of running the price of a stock up, selling millions of naked shorted
shares to the public, then artifically forcing the price of a stock down in
order to cover their shorts at a heavy profit. To do this, they often force the
price of the stock up or down at times when the stock should not be moving in
the direction that they are forcing it. A good example of this is the stock for
the Aspen Group (Symbol: ASRG). ASRG is in the natural gas exploration and
sales industry. Recently, they announced record earnings that went up by more
than 600% from the previous year time period, and record profits that went up by
more than 100%. In the face of such incredable news, the stock was forced down
to less than half it's original value in less than !
!
three months, with nothing to cause this decline save for manipulation of the
stock price for the gain of the MM's. I believe that if you check closly ito
this company, you will see the stock price declining in the face of heavy
positive demand over supply for the stock.
A quick search of the OTC stocks will reveal many manipulative practices, some
of which include:
1) The stock requiring an extremely heavy volume on the buy side to be moved
up, but a volume of less than 1/10 in comparison on the sell side to be moved
down.
2) The stock price of a stock declining daily in the face of heavy buying
pressure.
3) The MM's creating artificial volume in a stock by trading amongst
themselves, but reporting these trades in the volume of the stock.
4) The stock price moving either up or down for no apparent reason.
5) Stocks that have millions of shares sold more than the parent company has
issued. (The MM's have naked shorted millions of shares out of thin air without
covering, creating an artifully depressed price in the stock.)
Currently the SEC does not have any rules in place to govern the amount,
reporting, or time limit of short selling by the MM's in the OTC markets. Given
this the MM's have free reign to manipulate a stock all they wish, without fear
of reprocussion. I personally have no problem with the MM's doing a small
amount of short selling in order to insure daily fluidity in trading, but I
believe that there should be laws or rules that state that they are not allowed
to keep a short position for a long period of time, in addition to rules
limiting the percentage of shares that the MM's can short, in addition to a
resonable set of reporting practices that allow the public to see the number of
current shares shorted in an individual stock. It is the ability to hold a
short for weeks or months that is leading to this predatory manipulation and
defrauding of millions of dollars from the hands of the small investor."
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