Report: SEC IG Practices Related to Naked Short Selling Complaints and Referrals

Report

Editor: bottom line up front: SEC does not “do” complaints and considers naked short selling to be legal and generally contributing to “liquidity,”

Practices Related to Naked Short Selling Complaints and Referrals

Naked short selling has been a controversial practice for several years and, while not illegal per se, abusive or manipulative naked short selling (e.g., intentionally failing to borrow and deliver shares sold short in order to drive down the stock price) violates the federal securities laws.

The prior GAO audit found that Enforcement’s system for receiving and tracking referrals from the Self-Regulatory Organizations (SRO) needed improvements and recommended enhancements that would facilitate the monitoring and analysis of trend information and case activities.

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Article: The ‘Phantom Shares’ Menace

Article - Media

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

Article: Covering Up Naked Shorts

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Covering Up Naked Shorts

Harvey Pitt

Forbes, 11 July 2006

As crisis after crisis afflicts the business community and our capital markets, all too often the response is a form of reverse laissez faire. Business waits for government to tell it three things: if it has done something wrong, why it’s wrong and how to fix it. The ineluctable result is that, like Rick’s crooked police pal, Captain Renault, in the movie Casablanca, we’re “shocked, shocked to discover” we don’t like the government’s responses.

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Article: Investigator claims he was Fired for Hedge Fund Inquiry

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Investigator claims he was Fired for Hedge Fund Inquiry

Andrew Clark

The Guardian cited by RGM Communications via Wayback, 24 June 2006

The low-profile, high-earning world of hedge funds suffered a jolt yesterday as allegations surfaced of political influence and insider dealing at one of America’s most prominent players, Pequot Capital Management.

A former investigator at the Securities and Exchange Commission has disclosed that the authority has been examining suspicious trades at Pequot – a Connecticut-based fund which has $7bn (£3.8bn) under management and operates from offices in both the US and Britain.

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Article: SEC: Gone Fishin’

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SEC: Gone Fishin’

Chris Byron

New York  Times cited by RGM Communications via Wayback, 6 March 2006

It’s good to see that the U.S. Securities and Exchange Commission has come to its senses and that – at least for the time being – it won’t be enforcing the media subpoenas that have gotten the press so riled up.

But before anyone breaks out the pom-poms for SEC Chairman Christopher Cox, let’s remember that these wrong-headed subpoenas were 100 percent the responsibility of Cox’s own agency in the first place – and until the SEC develops better, more focused leadership, problems like those caused by these subpoenas are going to keep occurring.

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Article: Who’s Looking Out For You? SEC Critics Seeking Investigation

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Who’s Looking Out For You?: SEC Critics Seeking Investigation

Mark Faulk

FaulkingTruth cited by RGM Communications via Wayback,  27 June 2004

The mission statement of the SEC is clearly worded and easy to understand: “The primary mission of the U.S. Securities and Exchange Commission (SEC) is to protect investors and maintain the integrity of the securities market.”

Last Wednesday, they adopted new rules concerning short-selling that accomplished neither goal. Instead, they passed a watered-down version of their earlier proposed regulation SHO, a version that did absolutely nothing to “protect investors and maintain the integrity of the securities market”. And unlike their mission statement, the new rules are neither clearly worded nor easy to understand. In fact, the only clear message was the “subliminal” one that the SEC sent to investors, which was, simply stated: “We don’t care”.

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