Supreme Court to Decide if “Naked” Short Selling State Law Claim May Be Resolved in State Court
Lisa Soronen, 21 September 2015
The issue in Merrill Lynch v. Manning is whether state law claims alleging that the “naked” short selling at issue in this case violated state law must be heard in federal court.
In a short sale, a short seller identifies a security he or she believes will decline in value, borrows some of those securities from a broker and sells them. When the securities decline in value he or she rebuys them and makes a profit.
In a “naked” short sale the seller doesn’t borrow the securities in time to deliver them to the buyer—to manipulate the security’s price or to avoid borrowing costs. While “naked” short selling isn’t per se illegal under federal law, some schemes may violate federal antifraud law and Security and Exchange Commission (SEC) rules. Continue reading “Article: Supreme Court to Decide if “Naked” Short Selling State Law Claim May Be Resolved in State Court”
William D. Cohan, a former senior Wall Street M&A investment banker for 17 years at Lazard Frères & Co., Merrill Lynch and JPMorganChase, is the New York Times bestselling author of three non-fiction narratives about Wall Street: Money and Power: How Goldman Sachs Came to Rule the World; House of Cards: A Tale of Hubris and Wretched Excess on Wall Street; and, The Last Tycoons: The Secret History of Lazard Frères & Co., the winner of the 2007 FT/Goldman Sachs Business Book of the Year Award.
William Cohan Home Page
How Wall Street’s Bankers Stayed Out of Jail
The probes into bank fraud leading up to the financial industry’s crash have been quietly closed. Is this justice?
by William D. Cohan
Any narrative of how we got to this point has to start with the so-called Holder Doctrine, a June 1999 memorandum written by the then–deputy attorney general warning of the dangers of prosecuting big banks—a variant of the “too big to fail” argument that has since become so familiar.
. . .extracting large settlements paid with shareholders’ money is not the same as bringing alleged wrongdoers to justice.