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2007-08-15 Home Front Economy

SEC May Finally Crack Down On Naked Short Selling

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Posted by Anonymoose 2007-08-15 10:50|| || Front Page|| [5 views ] Top

#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|| 2007-08-15 11:03|| Front Page Top

#2 So corrupt.

Posted by newc">newc 2007-08-15 11:17|| 2007-08-15 11:17|| Front Page Top

#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|| 2007-08-15 11:43|| Front Page Top

#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|| 2007-08-15 11:55|| Front Page Top

#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">Zenster 2007-08-15 15:08|| 2007-08-15 15:08|| Front Page Top

#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">DarthVader 2007-08-15 15:26|| 2007-08-15 15:26|| Front Page Top

#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|| 2007-08-15 21:52|| Front Page Top

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