James J. Angel specializes in the market structure and regulation of global financial markets. He teaches undergraduate, MBA, and executive courses, including Investments and Capital Markets at Georgetown University. ”Dr. Jim” has testified before Congress about issues relating to the design of financial markets. Dr. Jim began his professional career as a rate engineer at Pacific Gas and Electric. Along the way he has also worked at BARRA (later part of Morgan Stanley). He has also served as a Visiting Academic Fellow in residence at the National Association of Securities Dealers (NASD – now FINRA) and also as a visiting economist at the Shanghai Stock Exchange. He has also been chairman of the Nasdaq Economic Advisory Board, a member of the OTC Bulletin Board Advisory Committee, and has served on the board of directors of the Direct Edge Stock Exchanges (later part of BATS Global Markets). He graduated from the University of California-Berkeley, Ph.D.
FINRA v UBS
24 October 2011
As set forth below, the Firm failed to comply with certain requirements of Reg SHO, FINRA Rules, NASD Rules and federal securities laws during the period covering, in whole or in part, January 3, 2005 through March 2010, with several violations continuing through December 31, 2010 (the “Relevant Period”), The Firm’s violations existed for various periods of time throughout the Relevant Period and are summarized below.
PDF (26 pages): FINRA v UBS
Alexis Stokes, Texas State University
Journal of Law and Business 5/1 (Spring 2009)
This article explores the origins of naked short-selling litigation; considers
the failures of significant naked short-selling lawsuits in federal court;
surveys the obstacles erected collectively by constitutional standing requirements, the Federal Rules of Civil Procedure, the Private Securities Litigation Reform Act, brokerage firms, death spiral financiers, and the Depository Trust and Clearing Corporation; examines the efficacy of Regulation SHO, SEC rule 10b-21, and new FINRA rules; discusses recent state legislation and state court litigation; and identifies non-litigation options to curb naked short-selling. Ultimately, this article seeks to answer the question: If manipulative naked short-selling is more than a mythological scapegoat for
small cap failure, what remedies are, or should be, available?
PDF (62 Pages): Article In Pursuit of the Naked Short
The ‘Phantom Shares’ Menace
John W. Welborn
Securities & Exchange, 24 April 2008
In 1985, the National Association of Securities Dealers (nasd) commissioned Irving M. Pollack, a securities law expert and former Securities and Exchange commissioner, to conduct a comprehensive review of short selling in nasdaq securities. The nasd sought to determine what, if any, additional short selling regulation was needed for the nasdaq market. The result was the now-famous “Pollack Study,” which described the short selling landscape of the day and made important recommendations regarding the disclosure, reporting, and settlement of short sales.
PDF (10 pages): The ‘Phantom Shares’ Menace
January 12, 2007
Ms. Nancy M. Moms Securities and Exchange Commission 100F Street, NE Washington D. C., 20549-1090
As a follow-up to my previous memo regarding this proposal to eliminate the tick test/ price test, I would like to further emphasize the concerns the public has with regards to the regulations of market making activities as they pertain to this proposed and all other short sale regulations.
Bloomberg via Wayback, 26 October 2006
The U.S. Securities and Exchange Commission, already under scrutiny for its handling of a trading probe that entangled Morgan Stanley Chief Executive Officer John Mack, now faces a broad review by government auditors of its management and methods for policing the financial markets.
The Government Accountability Office agreed last week to investigate the SEC’s enforcement division and compliance department after requests by Senator Charles Grassley, an Iowa Republican who questioned whether the agency gave Mack special treatment. Grassley asked the GAO to examine the SEC’s “planning, oversight, control and other management processes” and gauge whether the agency does enough to oversee regulators at the New York Stock Exchange and NASD.
Sanity Check via Wayback, 3 April 2006
After the great hoopla of the the Bermuda Short Sting Case, which produced a conviction rate of about 88% of indictees, the silence from the Government on related collateral indictments in pending cases, some more than four years old, is literally deafening.
The Government’s various agencies really have an “NIH” (Not Invented Here) attitude towards grass root developed cases coming up to them not as a direct result of their own investigative initiative. I am aware of case after case taken to various agencies of the Government with substantive evidence attached, which were ignored, black-holed, or thrown back at the victims.
Sanity Check via Wayback, 9 March 2006
There is one genuinely “Golden Rule” for professional short seller/raiders.
You never short a stock without an insider to leak manageable information to you. That insider might be an officer, director, control person, investor, analyst, inside legal counsel, outside legal counsel, or even a lowly disgruntled non-executive employee.
In working on some hundred plus companies directly since 1995, I have never once seen this rule broken. Many times the CEO’s of these companies have resisted this idea, but in NO INSTANCE have I seen even one exception to this rule when they were finally forced to look in on their own operations.
There is a process for looking for raider attacks on companies, but many are flawed strategically, because they are only looking out, and not in. I have been challenged by a number of clients on this, but when they would spend the money to use competent investigators, they always found the connection of an insider to the raiders. Moreover, they found the miscreant in ways admissable in Court, in phone records, emails, and more. This is not dissimilar to what Overstock’s investigator found outside the Company.
If you want a broadly known example, simply look at the Nabisco deal and KKR. The number three operating guy at RJR/Nabisco told them where all the bodies were buried, and ended up running the operations of the Company for them when they won the takeover battle.
Officers and Directors have a duty to insure that sensitive inside information about their company is not being leaked to anyone, unless it is someone doing so for ethical reasons. I have seen more than once the use of such informants by the SEC, NASD, and others. This is a more complex issue if discovered. No matter what, such a person must be quarantined until appropriate third party investigation can determine the foundation for such actions. Many times it is based on weak premises, but not always. You only have to look at Enron, Worldcomm, Global Crossing and more to see good outcomes from such behavior.
For your consideration.
Sanity Check via Wayback, 1 March 2006
I witnessed some of the most unprofessional broadcast journalism in my life history yesterday and today, in the treatment of Dr. Patrick Byrne on Kudlow and Co, where a gang of jounalists literally shouted over his voice, and this morning on CNBC, where the same tactics were tried again, only to have Patrick hold up a sign sending every viewer to go to www.thesanitycheck.com for more information.
These tactics I witnessed were similar to those used by the left against Ann Coulter recently, and are mirrored in the conduct of the Brown Shirts supporting Hitler in Germany in the 1920’s and 1930’s, and the Communists throughout their history. The hard left has used these tactics for decades, because they didn’t and don’t have an intelligent response to or plan for the issues at hand. Ditto here.