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| SEC May Finally Crack Down On Naked Short Selling |
| 2007-08-15 |
| SUMMARY: The Securities and Exchange Commission ("Commission") is adopting amendments to Regulation SHO under the Securities Exchange Act of 1934 ("Exchange Act"). The amendments are intended to further reduce the number of persistent fails to deliver in certain equity securities by eliminating the grandfather provision of Regulation SHO. In addition, we are amending the close-out requirement of Regulation SHO for certain securities that a seller is "deemed to own." The amendments also update the market decline limitation referenced in Regulation SHO... To explain, brokerages were driving hundreds of small cap businesses out of business by selling shares they didn't own and that in many cases even hadn't been issued by those companies, then shuttling these worthless shares among themselves at 15 day intervals to conceal them. This meant pure profits to the broker as long as the companies eventually went bankrupt, which they would do when their stock price was collapsed out from under them. For years, the SEC refused to enforce the law against these brokerages for "naked short selling", until it has started to threaten the economy itself. Now, it may all come to an end this October 15. |
| Posted by:Anonymoose |
| #7 For every short seller there is a buyer. The dis-honesty comes in when the naked seller avoids having to cover (buy) the stock he has sold short and effectively increasing the amount of stock in circulation and IMO manipulating the market. I suspect the problem of companies going bankcrupt is that the company's stock (and hence its price) is used to secure loans. If the price falls loans are pulled, so the company buys its own stock to keep up the price. Again, there is nothing wrong with this. However, the naked short selling practice described would create an unlimited supply of stock for sale and therefore drive down the price. Buying the stock wouldn't keep up the price in the way it would if only real stock were for sale. Clearly a short seller would make money if the company went backcrupt but could also make money by driving the price down at any time by selling non-existent stock. |
| Posted by: phil_b 2007-08-15 21:52 |
| #6 Whew. That is the one thing that terrifies me. Buying shorts from a ugly, naked vendor. What? That isn't the story? |
| Posted by: DarthVader 2007-08-15 15:26 |
| #5 This is the sort of predatory crap that gives capitalism a black eye around the world. When the hammer drops, the SEC had better be ready to light these thieving suckers up like so many cheap cigars. |
| Posted by: Zenster 2007-08-15 15:08 |
| #4 Finally, the SEC does something to protect both investors and corporations against outright fucking dishonesty. Bravo ! |
| Posted by: wxjames 2007-08-15 11:55 |
| #3 Goes to show what I know. Thought this was going to be a story about football in the Southeastern conference. |
| Posted by: JohnQC 2007-08-15 11:43 |
| #2 So corrupt. |
| Posted by: newc 2007-08-15 11:17 |
| #1 It also means that hundreds or thousands of brokers could be facing criminal charges because they are unable to pay off existing naked shorts. Their own firms will sue them or press charges. Not too long ago, the SEC even tried to "grandfather" and forgive existing naked shorts as a mass amnesty to all the brokers who had cheated hundreds of thousands of investors. That didn't fly. Come October 15, the SEC will either face the heat for refusing to enforce the law, or it will sacrifice a whole bunch of dishonest brokers. |
| Posted by: Anonymoose 2007-08-15 11:03 |