Foreign Collusion, Naked Shorting (Counterfeiting) & Money Laundering — All Illicit Wealth
Merrill Lynch Fined $7.2M Over Options Reporting Flubs
Law360, 2 January 2015
Merrill Lynch Pierce Fenner & Smith Inc. will pay $5.8 million in fines, while Merrill Lynch Professional Clearing Corp. agreed to pay $1.45 million to settle the joint enforcement action by FINRA, BOX Options Exchange LLC and Nasdaq’s options markets in Philadelphia and Boston, according to a settlement document dated Dec. 22, 2014.
Fails-to-deliver, short selling, and market quality
Veljko Fotak, Vikas Raman, Pradeep K. Yadav
Journal of Financial Economics, 1 December 2014
We investigate the aggregate market quality impact of equity shares that fail to deliver (hereafter “FTDs”). For a sample of 1,492 NYSE stocks over a 42-month period from 2005 to 2008, greater FTDs lead to higher liquidity and pricing efficiency, and their impact is similar to our estimate of delivered short sales. Furthermore, during the operative period of a Security and Exchange Commission (SEC) order mandating stock borrowing prior to short sales, the securities affected display relatively lower liquidity and higher pricing errors. Finally, we do not find any evidence that FTDs caused price distortions or the failure of financial firms during the 2008 financial crisis.
Goldman, Morgan Stanley And JP Morgan Named In Commodity Manipulation Investigation
Maggie McGrath
Forbes, 19 November 2014
A two-year investigation conducted by the Senate Permanent Subcommittee on Investigations has accused Goldman Sachs, Morgan Stanley and JP Morgan of manipulating commodity prices. In a nearly-400 page report released Wednesday evening, the subcommittee says that these banks have become “heavily involved with” the commodities markets and increasing risks to financial stability, industry and consumers.
Overstock.com v Goldman Sachs & Co
13 November 2014
Often, it is the federal courts, applying federal law, that wrestle with claims of cross-state securities fraud involving a nationally-listed stock. Here, plaintiffs of various states allege defendants, securities firms headquartered on the East Coast, violated California and New Jersey law through their involvement in massive naked short selling of Overstock shares. The trial court sustained demurrers to plaintiffs’ New Jersey Racketeer Influence and Corrupt Organizations (RICO) claim without leave to amend and subsequently granted summary judgment on plaintiffs’ California market manipulation claims.
PDF (61 pages): Overstock.com v Goldman Sachs & Co
Reuters, 3 November 2014
From bundles of cash inside scraps of newspaper to setting up shell companies, the trial in Florida of a former UBS executive is a reminder of the extreme methods some Swiss bankers used to hide clients’ cash.
Raoul Weil, 54, is the highest ranking Swiss banker to be arrested in the United States and prosecutors are seeking to paint him as a facilitator of efforts that helped conceal up to US$20 billion in taxpayers’ assets in secret offshore accounts.
Merrill Lynch Units Censured, Fined in Finra Settlement
Tess Stynes
Wall Street Journal, 27 October 2014
The Financial Industry Regulatory Authority said it fined two Merrill Lynch units a combined $6 million and censured the firms in a settlement of allegations that they violated rules that govern short sales and prevent naked short selling.
FINRA v Merrill Lynch
27 October 2014
Between approximately July 1, 2008 through July 2012, MLPRO failed to establish, maintain and enforce adequate supervisory systems and procedures, including in some instances written supervisory procedures, that were reasonably designed to ensure compliance with applicable securities laws and regulations including Regulation SHO, the 2008 Emergency Orders issued by the SEC and anti-money laundering requirements.
PDF (20 pages): FINRA v Merrill Lynch
Michelle Ong, Nancy Condon
FINRA, 1 July 2014
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Goldman Sachs Execution & Clearing, L.P. $800,000 for failing to have reasonably designed written policies and procedures in place to prevent trade-throughs of protected quotations in NMS stocks from November 2008 through August 2011 in connection with trading in its proprietary alternative trading system, SIGMA-X.
RGM Communications Archive on Naked Short Selling
Accessed via Wayback, 31 January 2001 – 31 March 2014
Listed below are a large number of public information articles and reports detailing the brokerage houses, market makers and the conduct of the main “street” characters engaged in the illegal practice of “naked short selling”, “death-spiral financing”, “failure to delivers (FTDs)” and/or stock fraud. This page is a resource for anyone wishing to educate themselves regarding the depth and breath of these illegal activities. Please note that some of the articles may have been added out of time sequence because they were discovered weeks or months after publication. All the dates are, to the best of our knowledge, when they came into the public domain.
Which short-selling regulation is the least damaging to market efficiency? Evidence from Europe
Oscar Bernal, Astrid Herinckx, Ariane Szafarz
International Review of Law and Economics, 1 March 2014
Exploiting cross-sectional and time-series variations in European regulations during the July 2008–June 2009 period, we show that: (1) prohibition on covered short selling raises bid-ask spread and reduces trading volume, (2) prohibition on naked short selling raises both volatility and bid-ask spread, (3) disclosure requirements raise volatility and reduce trading volume, and (4) no regulation is effective against price decline. Overall, all short-sale regulations harm market efficiency. However, naked short-selling prohibition is the only regulation that leaves volumes unchanged while addressing the failure to deliver. Therefore, we argue that this is the least damaging to market efficiency.
Currency trading scandals are the next big black eye for banks
Mark DeCambre, Jason Karaian
Quartz, 5 February 2014
These days, it doesn’t take much digging to find potentially scandalous behavior coursing through the world’s biggest banks. But the latest round of probes into currency trading are shaping up to be a real doozy.
Already more than 20 traders, which make money for their firms by betting on currencies’ shifting values, have left or been placed on leave by their employers. These banks and traders have not been accused of wrongdoing, but their departures send a message that something is amiss in currency trading.
Naked Gold Shorts: The Hows and Whys of Gold Price Manipulation
Commodity Trade Mantra, 20 January 2014
The deregulation of the financial system during the Clinton and George W. Bush regimes had the predictable result: financial concentration and reckless behavior. A handful of banks grew so large that financial authorities declared them “too big to fail.” Removed from market discipline, the banks became wards of the government requiring massive creation of new money by the Federal Reserve in order to support through the policy of Quantitative Easing the prices of financial instruments on the banks’ balance sheets and in order to finance at low interest rates trillion dollar federal budget deficits associated with the long recession caused by the financial crisis.
Biolase CEO Takes Dead Aim At Naked Short Sellers – Main Street Cheers
Seeking Alpha, 20 August 2013
Federico Pignatelli, Chairman and CEO of Biolase Inc. (NASDAQ:BIOL) called out naked short sellers and short-sellers attempting to manipulate shares of BIOL August 19th, in a candid press release. In short Mr. Pignatelli disclosed that Biolase will continue to issue stock dividends on a periodic basis to reward long-term shareholders and thwart the naked short selling of Biolase stock.
Securities Lending Times, 20 August 2013
“Abusive”, “like a form of terrorism” and “funny paper”are three descriptions of naked short selling, given by the Securities and Exchange Committee, a life insurance company CEO, and broker-dealer Jeffrey Wolfson, respectively.
They do not do much to dispel the belief of naked shorting as a practice that is even worse than selling a borrowed security, only to buy it back at a lower price—what we know as covered short selling.
THE DOLLAR HAS NO INTRINSIC VALUE : DO YOUR ASSETS?
