Article: The Naked Truth on Illegal Shorting

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The Naked Truth on Illegal Shorting

Karl Thiel

The Motley Fool cited  by RGM Communications via Wayback, 24 March 2005

It’s amazing how the word “naked” can liven up a discussion. Take naked short selling, for instance. The addition of this saucy little word turns the mundane act of borrowing and selling shares of stock in hopes of buying them back later at a lower price into a raging controversy fraught with conspiracy, secret identities, public recriminations, foreign intrigue, sports team owners, and now some of the top regulators in the land.

How can one word cause so much trouble? While legal short sellers must borrow the shares they sell, naked short sellers sell shares of stock they haven’t borrowed, have no intention of borrowing, and that may not even exist. Not surprisingly, this activity is illegal and has been since the Securities and Exchange Act of 1934. But for a number of reasons, regulators have overlooked it in the past.

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Article: Mighty Merrill Lynch bogs down in legal troubles

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Mighty Merrill Lynch bogs down in legal troubles

Thor Valdmanis

Securities Arbitration, 10 October 2002

Douglas and Deborah Millar are about to become $7.7 million richer. The Pennsylvania couple didn’t buy a state lottery ticket. Instead, they played another popular game of chance: Sue Your Broker.

In granting one of the largest awards on record six weeks ago, a private arbitration panel ruled that Merrill Lynch failed to advise the Millars on how to protect the value of a stake in former Internet high-flier FreeMarkets that in better times was worth $48 million. Merrill has appealed, but legal scholars say arbitration awards are rarely overturned.

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