|
Post by fastwalker on May 28, 2005 22:47:39 GMT -5
Did you know, there are at least a dozen or more.. « Thread started on: Today at 4:30pm » <br> -------------------------------------------------------------------------------- Hey Guys, was looking around on the net for some stuff and came across some “vintage” information on Naked Short Selling. Some is known, while some other stuff may not be. Any way...... For what it’s worth..
Did you know, there are at least a dozen or more ways to sell short a stock?
1. Traditional Short Sale: Borrow the stock against a fifty percent margin. This is the only type of short sale that can be squeezed when the share price moves up because the short seller must add money to their margin account.
2. A Market Maker Short Sale: U. S. Market Makers are not required to make physical delivery of stock certificates when they sell it. They are assumed to be a repository of the company's shares.
3. A Brokerage House Short Sale: This is a decision not to execute a buy order from a client, but show the stock as owned by the client on their monthly brokerage firm account statement.
4. A Clearing House Short Sale: The Clearing House doesn't execute the buy order, but credits it to the brokerage firm client's account.
5. A Naked Short Sale: This is where two brokerage firms agree to trade stock in a company with neither brokerage firm requesting physical delivery of the share certificates.
6. An Insider Short Sale: This is when insiders with restricted stock use it to sell short their company. It's illegal. It was a common practice when the Regulation S Hold Period was 40 days.
7. A Ferrari Short Sale: This is where a bloc of stock is purchased. The stock is converted to derivatives, thus factoring the stock one hundred fold or more. The short sale doesn't occur in the Stock Market, but the derivative owners are holding a short position.
8. The DTC Short Sale: This is when Depository Trust Companies use the stock they hold to short sell that stock.
9. The International Short Sale: Stock's created offshore. The company is listed to trade outside the United States (usually Canada). However the company is trading in the States. The shares are sold into the States. The Short Sale is moved to the Primary Country, where the local brokers can ensure that the short position will be covered by the listed company, if there is ever a successful short squeeze.
10. The Arbitrage Short Sale: LTV - Scattered Securities is an example of this short play. The Court in the LTV reorganization determined the exchange rate for new shares for old shares at three cents. The Market didn't read the Court decision. The old shares traded far higher than the Court Ordered exchange rate. The short sale was done by selling old shares and buying new shares before the Court mandated exchange of share certificates.
11. The Street Stock Short Sale: Sellers who are insiders or who allege to be insiders sell counterfeit stock to buyers outside regular market channels.
12. The MIDI Short Sale: Brokers sell stock at prices well above the actual trading price of the stock. This has been popular with German OTC stocks sold into the Middle East. The gap between the sale price and the trading price is an effective short sale.
13. The Depository Receipt Short Sale: Using counterfeit stock, the seller deposits it into an overseas bank. They then sell Depository Receipts against the counterfeit shares held by the bank. I've seen this done in Asia.
14. The Rockford Short Sale: An investment firm buys shares and takes physical delivery of the stock certificates. They replace the real share certificates with counterfeit share certificates. Next they sell the real shares back into the Market and repeat the process. This practice does wonders for their balance sheet. The tactic was popularized in the Rockford TV Series. It's been done in Asia with NYSE shares.
15. The Tax Haven Bank Short Sale: Small (usually Caribbean) banks act as agents for their clients unwilling to reveal their identity. The client wants to buy stock. The bank doesn't buy the stock on behalf of the client. They simply show the sale within the bank's accounting system. This practice extends to gold etc.
16. The Lost Certificate Short Sale: Client requests share certificate. Broker sends it certified to the slightly wrong address. It's returned to broker. Using the certified receipt broker claims the client has the share certificate. A year is spent in proving it never arrived. Meanwhile the broker has the share certificate and can use it to cover other short sales.
17. The Margined Short Sale: Buyer buys stock on margin. They can't take physical delivery of their share certificates. The broker sells the margined account non-existent stock (a short sale).
18. The Takeover Short Sale: Brokers add non-existent stock into a takeover with stock transaction. The buyer pays for the non-existent shares. The short seller gets cash or stock in the buyers company.
19. The Attrition Short Sale: For OTC stocks about 3% of the beneficial owners of the stock disappear each year. They die, forget they own the stock, etc. Brokers can safely sell short 3% of the float each year relying on the fact that the beneficial owners will never claim their stock.
20. Counterfeit Stock: Professionals regularly send counterfeit share certificates to Transfer Agents ands . A surprising percentage are accepted as real share certificates. The result is the professional effectively has sold short the shares involved in the certificate.
21. Issue Depository Receipts without holding the stock and sell the Depository Receipts.
22. The Warrant or Option Short Sale. Buyer holds the right to exercise warrants or options, but doesn't do so. Instead, they sell short the stock and use the options or warrants as insurance. This was popular among VSE underwriters in the 1980s-1990s
23. The Lending Short Sale. This was used by the guy who introduced me to the business. You offer to lend 90% of the face value of the stock to the borrower for a long period of time. Your interest rate is better than that of a bank. You take in the stock and sell it. You lend 90% of the proceeds from the sale. You are now short the stock. You collect your interest payments until the borrower defaults on the loan.
more....
|
|
|
Post by fastwalker on May 28, 2005 22:47:59 GMT -5
Without a doubt, even thought it is illegal there appears to be routine ways to engage in the practice. So, even though it should be clear to all in the market, that the sale of counterfeit shares of a public corporation is illegal. The practice still flourishes and these “market makers” within these specialist firms do so to control prices, eventually every one of those corporations will be bankrupted, as the market makers are not about to buy back their bogus receipts at higher prices. Guys, some realistic thinking, if the whole Wall Street operation functions in this manner, it stands to reason that like the cops on the take, those who suspect or know about the problem, may consider the problem to big to deal with. Again, once the market maker sells bogus shares to restrain (manipulate) price motion, he puts himself and his co-conspirators profiting from secret omnibus accounts in a very profitable position. That is, when price is restrained below the balance of supply and demand, public buyers predominate and money pours in while more and more bogus receipts flood the market. So it goes without saying, that eventually those corporations must be bankrupted as the market maker and his criminal cohorts are not about to buy back their bogus, counterfeit receipts. This has been the criminal operations of the Wall Street gang throughout it’s history. Now, if anyone believes that the White House, the Justice Department, the FBI, the SEC, etc. are protecting public interests ... think again. Ask yourself for example, why is the US Treasury "borrowing" paper fiat money from the private Federal Reserve? The bogus debt (based on "borrowed" paper money) created by accounting notations and printed by the US Treasury when paper receipts are needed would not exist if government were not protecting the thieves. Again, paying the Bankers a billion dollars a day for bogus interest for accounting notations is blatant thievery from the US Treasury and US Taxpayers.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:48:21 GMT -5
Check out this older article…<br>Members: US Senate Committee On Government Operations 1974 SAM J. ERVIN, JR., N.C. CHAIRMAN JOHN L. MCCLELLAN, ARK. HENRY M. JACKSON, WASH. EDMOND S. MUSKIE, MAINE ABRAHAM RIBICOFF, CONN. LEE METCALF, MONT. JAMES B. ALLEN, ALA. LAWTON CHILES, FLA. SAM NUNN, GA WALTER D. HUDDLESTON, KY CHARLES H. PERCY, ILL. JACOB K. JAVITS, NY. EDWARD J. GURNEY, FLA. WILLIAM B. SAXBY, OHIO WILLIAM V. ROTH, JR. DEL. BILL BROCK, TENN. ROBERT BLAIR SMITH, JR. CHIEF COUNSEL AND STAFF DIRECTOR SUBCOMMITTEE HENRY M. JACKSON, CHAIRMAN JOHN L. MCCLELLAN, ARK. SAM J. ERVIN, JR., N.C. ABRAHAM RIBICOFF, CONN. JAMES B. ALLEN, ALA. WALTER D. HUDDLESTON, KY CHARLES H. PERCY, ILL. JACOB K. JAVITS, NY. EDWARD J. GURNEY, FLA. WILLIAM B. SAXBY, OHIO HOWARD J. FELDMAN CHIEF COUNSEL STUART M. STATLER CHIEF COUNSEL TO THE COMMITTEE (The above names are identified at top of letterhead in small print).
Copy SAM J. ERVIN, JR., N.C. CHAIRMAN SUBCOMMITTEE HENRY M. JACKSON, CHAIRMAN JOHN L. MCCLELLAN, ARK. HENRY M. JACKSON, WASH. EDMOND S. MUSKIE, MAINE ABRAHAM RIBICOFF, CONN. LEE METCALF, MONT. JAMES B. ALLEN, ALA. LAWTON CHILES, FLA. SAM NUNN, GA WALTER D. HUDDLESTON, KY CHARLES H. PERCY, ILL. JACOB K. JAVITS, NY. EDWARD J. GURNEY, FLA. WILLIAM B. SAXBY, OHIO WILLIAM V. ROTH, JR. DEL. BILL BROCK, TENN. JOHN L. MCCLELLAN, ARK. SAM J. ERVIN, JR., N.C. ABRAHAM RIBICOFF, CONN. JAMES B. ALLEN, ALA. WALTER D. HUDDLESTON, KY CHARLES H. PERCY, ILL. JACOB K. JAVITS, NY. EDWARD J. GURNEY, FLA. WILLIAM B. SAXBY, OHIO ROBERT BLAIR SMITH, JR. CHIEF COUNSEL AND STAFF DIRECTOR HOWARD J. FELDMAN CHIEF COUNSEL STUART M. STATLER CHIEF COUNSEL TO THE COMMITTEE
United States Senate COMMITTEE ON GOVERNMENT OPERATIONS SENATE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS WASHINGTON D.C. 20510 January 30, 1974 Mr. George D. Brown 344 Barrello Lane Cocoa Beach, Florida 32931 Dear Mr. Brown:
On behalf of Senator Jackson, the Chairman of the United States Senate Permanent Subcommittee on Investigations, I want to extend to you his gratitude for your recent correspondence pertaining to the serious inequities in the operation and implementation of Federal law enforcement resources. Your letter and its enclosures were forwarded to my office in view of the Subcommittee's responsibility to analyze all aspects of organized crime and the theft and traffic of stolen securities. The materials which you have submitted have been read with considerable interest by both me and Senator Jackson.
In his capacity as Chairman of the United States Senate Permanent Subcommittee on Investigations, Senator Jackson is aggressively pursuing a number of inquiries relating to the intricate tiein between the operations of organized crime and stock manipulations as well as to the role of various law enforcement agencies and their oversight responsibility in connection with these activities. Therefore, the information which you have provided is of invaluable assistance to the Subcommittee and has been made available to those members of my investigative staff currently involved in these undertakings. I can assure you that if additional information is needed, a member of my staff will be in contact with you. Thank you again for your correspondence.
Sincerely, (Signed) Howard J. Feldman Chief Counsel Copy
MORE.....
|
|
|
Post by fastwalker on May 28, 2005 22:48:39 GMT -5
The scam is rather simple: the sale of bogus counterfeit receipts to naive citizenry while illegally manipulating prices below the natural balance of public supply and demand.
Thus, lowering price below the value established by a variety of factors entices a continual supply of "suckers" buying bogus counterfeit receipts run off on printing presses by the market makers. Eventually, engineered economic squeezes impact everyone.
Meanwhile, assets represented by the bogus paper must be severely damaged and perhaps maliciously bankrupted to artificially destroy the value of both the legitimate and bogus "watered" receipts to complete the vile robbery of their myriad victims.
Note: the thieves get your money up front and distribute it to their confederates via secret omnibus accounts (see U.S. Congressional Reports); then the destruction may be delayed until years later but it surely comes.
The thieves are not about to buy back the bogus counterfeit receipts ... at least not at higher prices! Conversely, the prices of certain legitimate receipts are artificially raised above the value determined by public supply and demand to give those entities, their owners, etc. special unwarranted advantages over others.
Yes, problems are created for some while others are free to do as they please, are given fat government contracts, plenty of operating capital, etc.
Many agents serving the thieves are in the employ of Government being paid as public servants but, in reality, are agents serving despicable people.
Many agents, of course, don't even realize who they truly serve but simply do the bidding of their bosses to keep their jobs, get promotions, raises, etc. Often even their immediate bosses don't realize what's going on but simply follow orders from higher echelons as dictates flow downhill. The laws are meaningless as the thieves and their agents are protected. How?
Simple logic dictates that an entity would have to have an endless supply of legitimate receipts to always sell at lower prices while purportedly insuring a steady flow, smoothing out price changes, etc.
Conversely, to always buy at higher prices to insure the reverse ... that entity would have to have an endless supply of money.
Neither is true when it comes to the larcenous operations of national markets throughout the world. THUS, THE TRUE OPERATIONS OF THESE MARKETS ARE FOUNDED ON SELLING BOGUS COUNTERFEIT RECEIPTS, FRAUD, DECEIT, LARCENY, ILLEGAL PRICE MANIPULATION, FALSIFIED REPORTS, PROTECTION OF THE THIEVES, DUE TO THE FEAR OF THE MARKET COLLAPSING UNDER THE WEIGHT ALL THE ILLEGALY NSS?
MORE....
|
|
|
Post by fastwalker on May 28, 2005 22:48:52 GMT -5
Interesting. As recent or as far back (depending on your persepctive) in 1974, the problems pluaging the market were on being discussed.
" A U.S. Senate Permanent Subcommittee On Investigations, within the U.S. Senate Committee On Government Operations, responded to an extensive list of conclusions provided to the Nixon White House and to every U.S. Senator.
The "ABOVE" Senate Subcommittee's 1974 response was quite interesting.
Nevertheless, the criminal operations of market manipulations continue unabated; and, the Securities and Exchange Commission still continues as watchdog it appears for the thieves and NOT for the citizens, investors, and their corporations.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:49:08 GMT -5
Even if your first stock was "CMKX" by now, you are acutely aware of the "Price manipulation" used to run up or down a stock....it's child's play for those given illegal license to ignore the laws, to sell bogus counterfeit receipts, to steal vast sums from the citizens, their invested wealth, and their corporations ... all while protected by agents on Government payrolls.
For example, only 800 simple transactions could dump price $100 per share regardless of predominant public buying.
The same results are achieved with any combination of zero, 1/16, 1/8, and 1/4 point moves.
Conversely, the opposite is also true. Price can be easily moved up when receipts are largely owned by the Market operators and their confederates ... even in the face of predominant public selling.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:49:22 GMT -5
To get a beter grip on what we are talking about here, which by the way isn't anything new, the following data has been added.
Market Operations
THE DYNAMIC LAWS
Adam Smith (1723-1790), a Scottish political economist and philosopher, wrote "Wealth Of Nations" (1776). Therein Smith described basic dynamic laws relating to natural Supply and Demand.
However, price manipulation by Market Operators exacerbate adverse volatile conditions in individual situations to make individual situations very, very obvious. It's like walking outside in the pouring rain or on a beautiful sunshiny day.
You know when it's raining and you know when the sun is shining and you should know when the Market Operators have been heavily selling bogus receipts to adversely manipulate price ... that's if you take time to monitor individual situations and/or the overall picture. It's way past time to rid the market place of the vile thieves and their protectors.
For example, the natural supply and demand curves versus price over a longer period of time form an 'X'. On the left, the demand curve is high and supply lower; whereas, on the right, the supply curve is high and the demand is lower.
Thus, an 'X' is formed. The center of the 'X' represents the value of the item relative to a host of factors. The value is where public supply naturally balances public demand. Therefore, the value may rise or fall relative to price depending on whether favorable or adverse factors predominate.
Price, of course, follows a squarish clockwise pattern around the 'X' either converging or diverging as the value moves up or down relative to price. Thus, as the value moves the whole 'X' moves up or down and changes shape accordingly.
Meanwhile, the unmanipulated price naturally seeks the center of the 'X' where public supply and demand are in balance.
Now as the price moves around the long term 'X', price in a natural situation also follows a short term 'X' pattern as price on a daily, weekly, or monthly scale seeks the interim value of a short term 'X'.
That is, when price is above the value established by public supply and demand sellers tend to predominate and when price is below the interim value then buyers tend to predominate. If price were to follow the value then the supply and demand would remain in balance and public buyers would balance public sellers.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:49:43 GMT -5
Now let's add a Market Operator, a dealer, satisfying public demand (public buying) at lower prices and absorbing public supply (public selling) at higher prices. He would be constantly acting opposite the public; therefore, he would always be selling at low prices (requiring an endless supply of legitimate receipts) and buying at higher prices (requiring an endless supply of money) neither of which he has.
If he were more honest and upright he'd lose his proverbial shirt on every day on every transaction. That is, it would be impossible for an honest dealer, a buyer and seller, acting opposite the public to even break even.
Therefore, logic and evidence say that the national markets are operated on chicanery, deceit, fraud, swindle-some dealings, theft, adverse illegal price manipulation, selling bogus counterfeit receipts, falsified reports, grand larceny, protection of the thieves, deliberately engineered bankruptcy or other destruction of assets represented by receipts, etc.
All are in violation of the laws of the land.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:49:58 GMT -5
O.K., BACK TO OUR 'X'... When the supply is limited the legs of the 'X' are steep and the 'X' is narrow. The value tends to move up or down more easily. Conversely, when the supply is abundant the legs of the 'X' are flatter and the 'X' is broader (wider). Here, the value tends to move relatively slow and in smaller increments.
The price line orbiting around the value: starting at (1) tends to be horizontal as it traverses from left to right across the top between the upper portion of the two legs.
That is, if price goes higher people won't buy, there are a predominance of public sellers, and if price goes lower there are plenty of public buyers. Then when the price crosses the supply line (upper right) price commences to drop as supply (public selling) predominates.
Public selling then continues to predominate as price drops to the demand line (lower right) where people won't sell at lower prices and the demand (public buyers) absorb the supply.
Price then traverses horizontally from right to left until it reaches the supply line (lower left). Note while price remains beneath the supply line public sellers predominate excepting when price drops below a point where people won't sell. This situation continues until price crosses over the supply leg to where public demand exceeds supply.
That is, hereafter public sellers will no longer satisfy demand. Price then rises until it hits the demand line where public selling satisfies demand and people won't buy if price were to increase further. The natural cycle then repeats with price constantly seeking the value determined by the balance of public supply and demand.
Again, this is the natural dynamics of price versus public supply and demand according to Adam Smith and economic logic.
more....
|
|
|
Post by fastwalker on May 28, 2005 22:50:17 GMT -5
THE DYNAMICS OF PRICE MANIPULATION
Begin with the price line. The Market Operator may hold price below the price line to induce a predominance of buyers or above the price line to induce a predominance of sellers and/or to virtually shut down public buying. Much depends on the short term value and long term value.
Again, by holding price close to the short term value the public buying temporarily balances public selling. Remember, if the Market Operator holds price up he must buy at higher prices and if he holds price down he must sell to satisfy public demand at lower prices.
At a given price line, public selling predominates and the Market Operator again can regulate the degree and type of public activity by where price is held relative to the short term value now moving down. By moving price down more rapidly the Market Operator slows public selling as price is held at or below the short term value.
Again, the Market Operator is constantly taking the side opposite the public and theoretically is "losing his shirt."
But, by holding price above the short term value induces a degree of public selling and a price below the short term value induces public buying.
So yes, the Market Operator still takes the side opposite the public and therefore buys high and sells low relative to the short term value.
Where the price rises the Market Operator is faced with selling to the public to satisfy public demand and raising price accordingly as the short term value moves up and up.
If the Market Operator restrains price at this stage the public buying increases accordingly, etc. So, how do the Market Operators and their fellow conspirators keep getting rich, rich, and richer?
Simple, the Market Operators utilize two or more accounts. One, a trading account, for public view and the others, secret omnibus unaudited accounts, through which the "suckers'" wealth flows into the thieves' coffers. Thus, holding prices below the short term value induces public buying to keep the public wealth flowing into the thieves' pockets and the bogus counterfeit receipts keep flowing into the public's hands.
None are the wiser as the supply of watered stock grows and grows. The artificial Dow Jones Industrial Average helps orchestrate and "justify" the thieves' price manipulations, and before the Dow is dumped the more heavily watered issues are mysteriously dumped well in advance.
The common excuse is that the all knowing public foresaw the coming correction and unloaded in advance.
The truth is that the Market Operators methodically manipulated price down, while the public keeps buying, buying, and buying on-balance while few if any are inclined to sell ... at least not until later when they can be induced to sell by adverse excuses or whatever. (sound like a seceniro we know?)
While this is going on (i.e. price being artificially moved down in the face of public buying), every time the DJIA turns upward the public buys even more heavily in the heavily watered issues as they appear to be good deals, excellent investments, etc., but price almost always fizzles and troubles are maliciously created.
Meanwhile, the professional excuse makers have entered the picture.Furthermore, if future prospects for a corporation's long term value are to rise, such as for the youthful growth corporation, public selling will be diminished under most circumstances. Conversely, if prospects for the long term value appear precarious then public selling would tend to predominate.
Thus, if adverse economic conditions, adverse publicity, adverse business prospects, and an adverse DJIA (bear market) are created then public selling can be induced to predominate. Therefore, these are all among the "tools" of Market Operators.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:50:33 GMT -5
ON-BALANCE TICK VOLUME (OBT)
In the early 1970's and perhaps earlier and later Harry Langford, Wichita, Kansas offered a service to investors by providing a multitude of charts wherein price and on-balance tick volume pertaining to individual issues were plotted together on a host of individual charts.
Interesting observations were that these graphs fell into categories which may be identified as category 1, 2, 3, 4 for discussion purposes.
Categories 1 and 2 we'll call growth companies with a smaller amount of legitimate securities available to the public.
Categories 3 and 4 we'll call larger more mature corporations with a greater supply of common stock in public hands.
Categories 1 and 2 were categorized by larger scales that revealed more fluctuations in price versus Categories 3 and 4 which due to smaller scales provided more of a smooth curve of price motion.
Thus, it was obvious that Categories 1 and 2 could be grouped together and Categories 3 and 4 could be grouped together based on the relative scales used to plot price.
Within each group the on-balance tick volume (OBT) either: (1) conformed more or less with price motion or (2) rose sharply contrary to price declines and generally did not parallel price.
In certain issues OBT fluctuated considerably to reveal a large scale and that a smaller volume prevailed. Whereas, in other issues OBT had little fluctuation (i.e. a smoother flowing line) to reveal a smaller scale and a much larger volume of activity.
Thus, a smooth flow with a rising OBT when price was declining revealed extensive short selling (i.e. selling bogus receipts) by Market Operators who were manipulating price down in the face of public buying. Subsequently, many of these corporations endured bankruptcy.
Similarly, issues with more fluctuations in the OBT line revealed a larger scale was being used and that short selling by the Market Operators was somewhat less although it obviously was happening. This also foretold of future troubles for these corporations.
Whereas, when the price and OBT moved together it revealed that price was more or less conforming with the short term value. Public buying more or less balanced public selling in those issues.
Laws governing Market Operations required Market Operators to short sell (i.e. sell their bogus receipts) either on up-ticks or zero plus ticks of price (i.e. a zero plus tick involved an unchanged price following an up-tick). This, of course, conformed more or less with the natural propensity of dealers to raise price to buyers. Note: after communications to each U.S. Senator and to the Nixon White House in 1973 that rule was officially abolished in mid - 1974 or '75 in an obvious effort to try to conceal matters.
However, the natural propensity for Market Operators to raise price for buyers still exists so the OBT records should still reveal what's going on relative to individual issues.
Guys...where I'm headed with all this, is to let you see that what wea re up against is much like the multiple headed Hydra, cut of one head another grows back. The problem we are facing with CMKX is not new. Sadly having been around for awhile, I lived through most of what as been displyed here for educational purposes, to inform and to encourge you, to try and understand what is going on and what may happen... more later...(whew....!)
|
|
|
Post by fastwalker on May 28, 2005 22:50:48 GMT -5
Ok, a bit more and will move on…
THE MANIPULATED 'X'
Heavily watered growth corporations reflect narrow, steep sided supply and demand curves ('X') especially when the price is manipulated down and severely restrained. When the DJIA is moved upward and individual corporations' prospects appear fantastic, the value moves up and up too.
Meanwhile price is restrained contrary to public buying which induces even more public buying. Yes, that's when the public is buying most heavily and the Market Operators are having a hey day getting richer selling untold bogus, counterfeit receipts.
Thus, when you go outside and it's raining "cats and dogs" you know it's raining.
And, one glance at individual issues when the Market Operators are doing their thing should be just as obvious. Yes, at times it's like when the thunder is booming, lightning flashing, sky darkened, and the rain and hail are pelting everywhere ... you know it's raining heavily
When a youthful growth company needs extra cash either to research and develop new ideas and innovations, to double production facilities, to purchase another company, to distribute and promote new products, to expand markets, etc. they have several options such as issuing bonds (getting loans which saddles them with interest payments and debts that eventually must be repaid), cutting costs which usually limits their abilities and income, selling assets which again limits corporate abilities, or selling additional stock (selling additional legitimate receipts) which officially dilutes the existing owners' equity in the company.
In the latter situation, if the price of corporate receipts are relatively high, management may elect to split their stock perhaps even 5 for 1. That is, management may issue four additional receipts for every one share of existing stock and at the same time price is divided by five. So, for every 100 receipts selling for $100 each, each owner would then have 500 receipts selling at $20 each.
Essentially, on the surface nothing would change: the 100 old receipts were worth $10,000 and the 500 new receipts are still worth $10,000. However, the cost per receipt has suddenly dropped into a price range where a whole new group of potential buyers exists. That is, 100 new receipts now cost only $2,000 rather than $10,000 for the old.
Thus, stock splits are a standard practice for growing corporations. This is especially important in a global economy with global communications as people around the world now have easy access to purchase a company's stock.
But let's consider what really happened in the growth company whose receipts had been heavily watered. Assume there were 15 million legitimate receipts and 150 million bogus counterfeit receipts that the company doesn't even know exist.
A 5 for 1 split multiplied the 15 million legitimate receipts to 75 million new receipts. However, it also multiplied the bogus receipts from 150 million to 750 million. And it also lowered price to where the thieves would be selling that much more bogus counterfeit stock.
Eventually, that company would be forced into bankruptcy to eradicate the thieves' liability to repurchase the flood of bogus receipts. Oh, it might take ten to twenty years more or less; but, the thieves, their agents, and toadies in Government will "do the trick" if people and corporations don't demand an immediate clean up.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:51:10 GMT -5
The following letter offer an interesting perspective..
Securities and Exchange Commission: 450 Fifth Street, NW Washington, D.C. 20549-0609 Dear Mr. Katz, Re: File #S7-23-03
I just received an inquiry from a U.S. micro cap investor asking me just how long things on the smaller trading venues in the U.S. markets, namely the Over the Counter Bulletin Board (OTCBB) and the Pink Sheets, have been this far "out of whack".
My answer was that they've always been very "loose" but since "decimalization" came into being a few years ago, things have spiraled out of control. Decimalization has lessened the "spread" between the bid and offer of these securities significantly.
Since market makers live "off of the spread" their earnings have been negatively impacted. Since the shareholders of the large publicly traded market-making firms have grown accustomed to certain levels of earnings, the pressure is on these firms to make up for the earnings lost to decimalization's deleterious effects.
Historically the role of the market maker was seen as two-fold. He was to bring together those wanting to buy shares of a specific issuer with those wanting to sell these same shares. In the absence of one or the other, the market maker would step up to the plate and fulfill the role of the missing party in an effort to inject liquidity into these markets.
In so doing, he would take on demonstrable risk. After selling nonexistent shares into a buy order that appeared when no sellers were around, this "bona fide market maker" would then attempt to repurchase these shares at a slightly lower level and pocket the difference or "the spread". He would thus be "injecting liquidity" onto both the buy side and the sell side and the risk that he assumed was mitigated by his superior visibility of buy and sell orders and his ability to capture this "spread".
Thus the prototypical "bona fide market maker's" role was to provide a "forum" for buyers and sellers to interact, and to be willing to inject liquidity TO BOTH BUYERS AND SELLERS when one or the other was missing at any specific time. In so doing he did indeed assume demonstrable risk.
In exchange for this assumption of risk and to implement the performance of a "bona fide market maker`s" role, the regulators ENTRUSTED upon a bona fide market maker while acting in a bona fide market making capacity, and ONLY to these ROLE PLAYERS, the privilege to be able to sell nonexistent shares into a disparity involving an excess of buy orders coincident with a dearth of sell orders (NASD RULE 3370).
He was to then quickly cover this naked short position by going onto the bid for a like amount of shares. THE ASSUMPTION MADE BY THE REGULATORS WAS THAT ALL MARKET MAKERS ENTRUSTED WITH THIS GIGANTIC AND INCREDIBLY EASY TO ABUSE PRIVILEGE WOULD ACT IN GOOD FAITH.
So what went wrong? Unethical market makers and their co-conspiring clearing firms, hedge funds, Canadian broker/dealers, naked short selling consortia, and other "associates" realized the tremendous amount of money that could be "earned" by leveraging this "privilege" and sharing the space under this "umbrella of immunity" from the necessity of borrowing shares before selling them.
What this, and the knowledge of the existence of several other loopholes in the system, has resulted in is the ability of these co-conspirators to sell nonexistent entities to U.S. micro cap investors, take their money, and to sit on the resultant "failures to deliver" or loans made to mask these "fails" for a prolonged amount of time while the victim U.S. corporation slowly died from the resultant massive dilution caused by the presence of these "counterfeit shares" in the system and their ability to be sold at any instant in time.
In a nutshell, the balance between the risks taken by a market maker and the privileges granted to the market maker for the assumption of that risk, has been lost. This was caused by what my book refers to as "the onset of one-sided liquidity only". What happened was that the unethical market makers were always there to inject liquidity by selling nonexistent shares into an imbalance of an excessive amount of buy orders, but they were conspicuously absent when the imbalance became that of too many sell orders.
Addressing this imbalance would necessitate the spending of the incredibly large pile of investors' money in front of them that they "EARNED" from selling nonexistent entities. So much for the regulators' assumption of "ACTING IN GOOD FAITH". There was just too much "Free investors' money" in the system to fight off this temptation.
Thus the liquidity being provided is not 2-sided liquidity that leads to the two main benefits of legal short selling, that being 2-sided liquidity and increased market efficiency. And how about the demonstrable risk being assumed in exchange for the right to sell nonexistent entities into buy-side imbalances? Let me answer that with a question.
How much risk is there in shooting these micro cap "fish" in the barrel provided by the OTCBB and Pink sheets? In this computer age do we really need a middleman to bring a buyer and a seller together? Do we need "one-sided liquidity only" being provided by somebody entrusted with the power to introduce counterfeit shares into the system?
Does the term CONFLICT OF INTEREST apply here? Have these trading venues, in essence, been hijacked by the middlemen and their coconspirators and converted into their own cash machines at the expense of the mom and pop investors?
Cannot a willing buyer seeking "real" shares interact with a willing seller in possession of "real" shares, without a middleman, even though the market would be less liquid and the buyer might have to pay slightly more per share? (A "real" share only market) Is the ability to easily buy counterfeit electronic book entries of a U.S. corporation being pushed off a cliff really what "liquidity" is all about?
So what are we left with? We are now left with the perpetrators of these frauds sitting with a gigantic pile of U.S. micro cap investors' money in front of them as well as trillions and trillions of "counterfeit" shares or more accurately, "counterfeit electronic book entries" sitting in the "D" sub accounts at the Depositary Trust and Clearing Corporation in New York City, within "in house" proprietary accounts at unethical brokerage and clearing firms, and within the Canadian brokerage system as well as other offshore non-NASD brokerage firms and banks.
What's the solution? The solution is to force those with the investors' money in front of them to deploy those very same funds and immediately buy back out of the open market the shares that they previously sold but never owned so that no other U.S. micro cap corporations will become insolvent from the weight of those counterfeit electronic book entries that unfortunately can be sold at any instant in time.
Remember that the exemption from borrowing before selling is only legally accorded to market makers while acting in a bona fide market making capacity i.e. sell then immediately repurchase. If there are no gigantic naked short positions in existence as reported by the market making community, then there will be nothing to buy in, right?
What's the risk to the SEC or the members of Congress that oversee the SEC, should the SEC fail to act, in demanding the immediate buy-in of these nonexistent entities?
Sincerely, Dr. Jim DeCosta
excellent letter....wonder why it never received any "face time" in our NSS struggle?...fw
more..
|
|
|
Post by fastwalker on May 28, 2005 22:51:27 GMT -5
Date:November 7, 2003 Crystal Celina Sandoval
To: Securities and Exchange Commission Office of Trading practices, Division of Market regulation
Subject: Reroposed SHO rules Release No. 34-48709, File no. S7-23-03
To Director Donaldson, members of the office of Trading Practices and the Division of Market Regulation, please allow me to submit my personal comments as they pertain to the proposed SHO, or short selling rules as released by your members recently.
My name is Crystal Sandoval and I am 22 years of age and am new to the investment arena, however I do understand the criticality and importance of this new proposed legislation. I will be confining my comments to the specific areas of "Naked Short Selling, (or the Selling of Counterfeit of Shares by Broker-Dealers & MMs), as I feel that it is the area that concerns me and affects most investors.
I'll start by saying, I commend your group for finally stepping up to the plate to address, what I and other OTC Small Cap investors consider as one of the most egregious Securities Market problem out there today, and to thank you for the opportunity to comment.
I will start with the commission's proposal to implement a uniform "locate" rule, applicable to "all" securities, which should include the OTC-BB-Pinks/Grey. First, I find it quite disturbing that no such rule currently exists within the SEC today, considering the issue of naked short selling (or the Selling of Counterfeit Shares) was addressed as far back as 1934.
Were not the recent SEC statements of (Manipulate, Abusive, Problem) in the meeting of 10/22/2003, regarding the selling of counterfeit shares applicable after 1934 and again in 1997 when it (the selling of counterfeit shares) was again identified as a major problem, yet nothing in the form of corrective legislation from the SEC was introduced.
All the while rule #3370 NASD (Affirmative Determination), was on the books and apparently never enforced, why?. Who would be the appropriate entity to enforce rule #3370? Where is the loophole in rule #3370 that allows bypassing Affirmative Determination in any Market?
Now, five years later, and after billions of dollars have been bilked from the investment public in fraudulent practices, the SEC, again states, that the selling of counterfeit shares is "still" a problem. We also now know that the SEC considers the problem of selling counterfeit shares to be a pretty serious problem because they themselves used the terms Manipulative, Abusive & Problem, over & over during the discussion of this issue/subject, in the 10/22/2003 meeting.
Those were powerful words uttered by the SEC that day, prompts one to ask though, who or what group were they directed at in the investment process, and the connotation of those powerful words would lead one to believe that the impact had to be negative. Well, that's partially correct.
I would submit that the impact was both negative and positive, and primarily to three groups, i.e., Investors (long), Investors (Short) & Broker-Dealers/MMs. Let's deal with the long investor, impact (Negative) substantially negative in the form of losses. Investors (illegal shorters - through Canada & Off-Shore), impact (Positive) substantially positive in the form of Tax Free profits.
Last but not least, the Broker-Dealer/MM, impact (Positive) again substantially positive in the form of profits through commissions as they facilitate all sales/transactions. Does this give the appearance that the deck might be stacked against the long investor in the OTC-BB - Pink/Grey market.
Why has the enforcement community chosen to turn the other way, when they themselves described this egregious problem as Manipulative, Abusive and a Problem. Why has the enforcement community turned the other way when they themselves admitted that ("Naked Short Selling-or The Selling of Counterfeit Shares" exists and that they have been investigating it for over five years?
I think the "locate " rule could be a great addition to help combat the problem of naked short selling, however, neither The SEC's new rule, nor the existing rule at the NASD is of any use if neither rule is enforced, rigorously!
more...
|
|
|
Post by fastwalker on May 28, 2005 22:51:43 GMT -5
continued..
Ladies & Gentlemen of the Commission, its time for answers, honest answers. It time for regulation and enforcement of the rules. We will not permit you to turn your heads the other way another time. Justice must be served. Next is the proposal to require broker-dealers to "locate" and "annotate" certificates, in writing, before effecting any short sale.
The rule has merit and should be implemented, however, history warns us, that without an officer of the SEC standing over the shoulder of every broker-dealer's trader, this rule will be ignored, just like current rules have been ignored, creating massive fail to deliver(s), and fail to receive(s) that are still in the system. One shouldn't have to remind the commission that new regulation must cover "all" parties involved in the trade, i.e., seller, buyer, Market Maker and Broker.
Primarily, the Commission must remember that it is the Broker-Dealers, and Market Makers that allow the trades thus, facilitating the problem of "Naked Short Selling or The Selling of Counterfeit Shares, as "all" orders flow through their respective offices. These continuing problems only solidify the need for SEC oversight and enforcement, as history has proven that self policing (SRO) has failed miserably in their in their mandate to police themselves.
What has really failed the small investor in this area is the reluctance of the SEC to enforce the rules, leaving a question of their of their value. The only way to truly correct the current problem, is the SEC "must" create an environment where by "all" members are forced to abide by both the SEC's rules and those of the SROs, under threat of stiff sanctions.
As such, why does the current "locate" proposal put the onus only on the seller, and/or the sellers' Broker-Dealer, when it is in this area that there is no trepidation for the SRO's to not police themselves. The annotate rule is a must for the seller's Broker, however, a good sale is a two way street, i.e., seller & buyer. Thus, I believe the rule to "locate" certificates should also mandate that an equal responsibility is inherited by the buying Broker-Dealer to receive "good delivery" from the selling Broker-Dealer..
In my opinion, the two-day settlement rule also lacks punch. My fear is, under the current SHO proposal, what would prevent the seller from "Naked Short Selling" aggressively, which in turn could cause a panic sell off by other holders of that security.
Doesn't matter whether that seller was locked into a 90 day no sell period, they would still be able to buy back their short position, and lock in profits, all to the detriment of the company and its shareholders. A deterrent to that situation would be to add an additional step in that rule, which says that the selling Broker-Dealer is also locked out for 90 days from shorting that security.
That way you prevent or deter the monetary incentive for a Broker-Dealer or a Market Maker to venture into this sort of manipulative endeavor. Now, the proposal to include additional safeguards in areas where there is evidence of significant settlement failures is one of the best proposals your are considering, however, it must be all inclusive, i.e., it must include all current settlement failures as well as, and most important, it must be retroactive to include all current settlement failures that are piled up in the bottom drawers of Broker-Dealers all across this securities market.
This rule, among all of the others, in my opinion, reinforces the basic rule of supply and demand. Which, If I'm not mistaken, is the fundamental and underlying principal of the securities market. Additionally, by including this very important provision, it will send a very strong message to those who would seek to circumvent the system, that their illegal activities will no longer be tolerated. It would also be a very efficient way to return stolen monies to those investors who have seen their portfolios decimated by the egregious practice of Naked Short Selling, or the selling of Counterfeit shares.
Clearly, current penalties and sanctions have no little or no effect as a deterrent to Broker-Dealers who not only continue to allow this activity to go on but also profit enormously from it, i.e., from the commissions alone. The question is also being asked as to whether the bid tick test should also extend down to the OTC market? Why shouldn't it if we really serious about curtailing illegal Naked Shorting. I would further ask the commission this one basic question...Is the color of the money being wrongfully taken from investors and companies of lower cap securities any less green than that of higher cap securities?
This current loophole, along with the lack of enforcement by any agency, are a few of the avenues that "Naked Sort Sellers" are currently utilizing to flood the market with unauthorized, counterfeit shares, at ongoing prices below the last trade. Additionally, Are the small caps not entitled to equal protection under the law? Who makes the decision to draw the line between markets, when it comes to enforcement of the rules.
In conclusion:
The SHO proposal does not go nearly far enough in my opinion. We, the investing public are tired of reading daily about the abuses in the marketplace. We are tired of seeing slaps on the wrists and token fines paid without admitting or denying guilt, which has had the opposite affect as a deterrent. We are tired of seeing existing rules and regulations not enforced. There must be "zero tolerance for Affirmative Determination and Failed Deliveries" across all markets. You fail and you lose your license to do business period.
Too many have had too much stolen from them by too few, with no redress. I plead with you to have the courage and leadership to do what you know in your hearts needs to be done to restore integrity and confidence to the marketplace.
you go girl....lol
more...
|
|
|
Post by fastwalker on May 28, 2005 22:52:14 GMT -5
Ok, so where do we go now?... we continues to review the past for more information to make our case in the present. For example.... this letter was extracted from another case, dealing with market manipulation...
November 27, 2002
More than 20 years ago, in 1981 to be exact, a graduate student produced an important research paper comparing the returns on stock investment based on market size from 1926 through 1969. Much to everyone's surprise, he proved that large-cap stocks - the ones that everyone knows about, such as IBM and GE - significantly under performed smaller companies that most people have never heard of. He showed that small-cap stocks had risen at a compound rate of return of 12.1%, as compared to 9.8% for large-cap stocks.
The premium performance of small caps resulted in a huge difference in wealth accumulation in the long run. Portfolio theorists were fascinated by the findings and immediately began to seek explanations for the divergence in returns.
A few simple explanations seemed to account for most of the difference. The first explanation suggests that smaller companies can be more effective than larger ones in evading competition. Smaller companies can serve "niche" markets, where they may face less competition and consequently can charge higher prices. Higher prices then lead to higher earnings, and thus a higher stock price.
For obvious reasons, large companies are seldom found engrossing niche markets, although Microsoft might have been an exception for a time. The idea was that the "niche" strategy provides a sustainable competitive advantage that could explain why some small-cap stocks have outperformed larger companies over time. Of course, sometimes the "niche" market is also a new market, and among the factors forestalling competition is patent protection. Many fortunes have been made on investments in small-cap companies employing patent protection to develop niche markets.
The second reasonable explanation shows that smaller companies are often in emerging industries, and therefore have the possibility of generating huge earnings growth in the future.
The greatest opportunities for wealth creation arise from buying the stock of a small-cap company that has the potential to grow into the next Microsoft or Intel. For reasons of simple arithmetic, it is implausible that an investment in Microsoft or Intel today could compound as far as investments in companies like GeneMax, a company developing immunotherapy treatments, can if they attain their potential.
At $8 per share, GeneMax has a market cap of about $121 million. If its immunotherapy, which has effectively cured cancer in laboratory animals, works as well in people, it is easy to imagine that GeneMax could be worth $80 per share, or even $800 per share. I don't know what a cure for cancer would be worth. But it could be worth a lot. GeneMax could grow a hundred fold in value. Or maybe a thousand fold.
To attain a market cap equivalent to that of Microsoft, GeneMax would have to reach a share price of approximately $15,500 per share based on the current number of shares outstanding. The MicroSofts of the world cannot easily grow a hundred fold in value. At its recent price of $43.77 per share, Microsoft had a market cap of $234.76 billion.
While it is unlikely that the GeneMax stock price could appreciate by almost 2,000-fold, it is impossible that such an appreciation could happen again to Microsoft. To be more precise, for Microsoft to compound by 1,960 times, equivalent to the growth that GeneMax would require to become the size of Microsoft now, Microsoft's market cap would have to exceed the GDP of the United States by about 45 times over.
It does not take a divine genius to see that that is unlikely. Put simply, very-large-cap companies cannot grow much faster than the economy as a whole. They certainly cannot duplicate the growth rates that are possible for mini- and small-cap companies.
Given the strong track record of small-cap companies in the half century prior to 1981, it is hardly surprising that a number of new-money management firms were founded in the early '80s with the express purpose of investing in small-cap stocks. We know small-cap stocks dramatically outperformed large- cap stocks from 1926 to 1969, but over the last 15 years, from 1987 to 2002 - after the small-cap "anomaly" was discovered in 1981 - the returns have not met the expectations that the research supported. In fact, after the experience of the 1990s, most investors probably feel that large caps outperform small caps.
Almost everyone has had a personal experience of a small-cap holding that seemed promising but ended up plunging in price. From 1987 to 2002, the S&P 500 generated a compound annual rate of return of 12.1%, while the smallest capitalization stocks averaged only marginally better - 12.6%. The strong performance of the large-cap S&P relative to small-cap stocks is particularly noteworthy in that there are strong reasons to expect large-cap stocks to under perform ever more significantly.
For example, Ray Kurzweil, a computer scientist at MIT, has recently calculated that we will see a century of technological change in the next 25 years. Kurzweil believes that exponential growth of computational power - up by an astonishing 40 billion times in the past 40 years - has set the stage for ever-accelerating technological change. This exponential growth, which he calls "the law of accelerating returns," proved predictive of many of the technological advances at the end of the last century.
more...
|
|
|
Post by fastwalker on May 28, 2005 22:52:55 GMT -5
continued...
According to Kurzweil, "the rate of technological progress is speeding up, now doubling each decade." Kurzweil believes we will see 20,000 years of technological progress by the end of the 21st century. Rapid-fire technological change of the kind foreseen by Kurzweil turns the logic of 20th century investment strategy upside down. It makes investment in smaller companies with simpler business models, paradoxically more attractive than blue chips like Cisco Systems or conglomerates like Tyco or even General Electric.
No one has ever become wealthy buying shares in companies that were already successful. To make big money, you have to buy when companies look like dogs, and most people doubt that they will ever succeed. John Templeton based his fortune on buying shares of the hundred lowest-price companies he could find listed on stock markets before World War II. Even during the Great Depression, profitable stocks did not trade below earnings.
That said, it is important to understand why the over-performance of small-cap stocks has virtually vanished at a time when technological change should have given an added impetus to smaller companies. This is a complicated issue. Part of the explanation for the greater performance of large-cap stocks is the buoyancy of the market itself during the decades of the 1980s and 1990s.
During the 1980s, for example, stocks as a group returned 17.57%. During the 1990s, returns were even higher - 18.17%. Only during the 1950s did market returns exceed those in the last two decades of the 20th century. Obviously, when markets are compounding at a high rate, small-cap companies soon become large-cap companies, and thus escape from the category. Microsoft was a small-cap company when it began trading on March 13, 1986. But after the rapid growth of its business and eight stock splits, it migrated into the "large-cap" category.
So paradoxically, part of the reason that small-cap investment appeared to be less successful was precisely because it was so successful. But there is also a darker subtext to the issue.
It involves market manipulation made possible by well-meaning institutional responses to the staggering increase in trading volume on U.S. stock exchanges. Prior to 1829, total stock trading volume in America never reached even 50,000 shares a day. By 1886, daily volume first ballooned to more than one million shares. Yet even in the heady days of the 1920s, stock ownership remained relatively narrowly based and volume relatively small. Indeed, the last time daily trading volume fell below 1 million shares was in the Eisenhower administration, on Oct. 10, 1953. By 1972, daily trading volume exceeded 15 million shares per day.
By the end of last year, volume had exploded to more than 2.5 billion shares per day, more than a 10-fold increase from the early 1990s and thousands of times greater than in the early '50s. This stupendous explosion of trading volume created a logistical challenge of the first magnitude, namely how to transfer stock certificates to reflect the changes in ownership from sales and purchases by customers. In the infancy of stock trading, when volume was light, it was relatively simple to effect delivery of shares.
Messengers scurried around and delivered paper certificates by hand from one investment bank to another. In 1924, the Stock Clearing Corporation was established to facilitate trading. But with trading volume escalating into the billions of shares daily, securities dealers and stock market officials sought a better way to clear their trades.
The result was electronic clearing organized through the Depository Trust Company. The Depository Trust Company is a trust company organized under the banking laws of New York State. It is owned by banks and broker-dealers. It is a custodian of securities that effects "book-entry delivery" in which "transfers of securities within the DTC system are processed by debits and credits to Participants' accounts."
In reviewing a lot of material about the DTC, which I must say is obscure and boring in the extreme, I got the distinct impression that its organizers were more concerned with effecting payment for securities than with the niceties of securities delivery. The DTC says, "DTC does not itself guarantee any funds or securities transfers which its Participants are obligated to make."
The DTC is organized on the assumption that broker-dealers, market-makers and clearing agents are all operating in goodwill and need looking at mainly to ascertain that their wire transfers in payment for securities don't go astray.
Where this electronic settlement becomes an issue is when it comes to the shares of mini and small-cap companies traded on the Pink Sheets, the OTC and the Nasdaq. The rules and conventions that have arisen around electronic settlement effectively permit unscrupulous operators among the many thousands of broker-dealers to counterfeit large quantities of stock, which they can sell for payment.
Given the magnitude of the logistics problem in clearing trades, it is understandable that this could happen. It is much easier to monitor the delivery of payment than it is to authenticate the delivery of shares, especially in an electronic clearing system where every broker-dealer has the de facto capability of counterfeiting securities by simply finding a buyer for them.
Say you want to buy a million shares each of GeneMax and another small cap company. Market maker Doaks has shares of neither. But, either on behalf of some client or on his own account, he sells them to you, crediting your broker's account with 1 million shares of GeneMax and 1 million shares of the other. Your broker now has an electronic credit for those shares, against which he wires funds or nets funds against his credit at DTC to Doaks' Participant account there.
Thus are counterfeit shares created and put into circulation. Doaks or his client has pocketed a lot of money for counterfeiting shares he did not have. And your broker has an electronic credit for those shares at DTC. When another of his clients dies, the executor of his estate orders the liquidation of his account, including 500,000 shares of GeneMax. The credit for those shares originally concocted by Doaks now transfers to the account or accounts of the participating broker-dealers whose clients bought the GeneMax shares from the estate. And so on.
Ostensibly, broker-dealers have the capacity to sell securities they don't own and don't have to borrow - as you would if you were selling short - to facilitate market-making. In theory, the broker-dealers can sell quantities of stock they don't own in order to make an orderly market and prevent the price from spiking on big buy orders. In theory, abuses are limited by the requirement for the market-maker to post capital and limit "naked short sales" of any one issue to 10% of the capital account.
That is the theory. The reality is a bit more ugly. No one is really monitoring the aggregate impact of the counterfeit sales on any given issue. It is simple to confirm that payment has been rendered for a sale. When the cash credit is transferred between participants within DTC or the Fed wire hits, the issue is resolved. But in an electronic, book-entry deposit system, every credit for a share purchased is indistinguishable from an actual share issued by the company treasury, even if it was counterfeited. No one bothers to reconcile the share credits in the DTC system with the authorized, freely trading shares of the company.
Consequently, it is quite common for the effective float of small-cap companies to be inflated significantly by electronic counterfeiting. In some cases, the total effective float has been multiplied many times over. Hence the sometimes weak performance of mini- and small-cap stocks. Their stock prices plunge because the supply of stock is artificially multiplied by naked short selling, better understood as electronic counterfeiting. Unscrupulous broker-dealers and market makers can effectively drive the prices of stocks into oblivion by selling vast quantities of stock not issued by the company.
Having come to understand this, I see an urgent need to curtail this electronic counterfeiting of the shares of small-cap companies. It not only fraudulently deprives investors in the affected companies of wealth but it is also destructive to the economy. And the news media seldom deign to report on it. Other than a few minor squibs on the news pages of The Wall Street Journal, there has been virtually no coverage of this issue. Indeed, it is so obscure that you may not even know what I am talking about.
If so, that only underscores the need to shed more light on this predatory practice. I should also say that I am confident that this problem will be rectified. Maintenance of honest and orderly capital markets is tremendously important to the economy of the United States.
eom
more...
|
|
|
Post by fastwalker on May 28, 2005 22:53:25 GMT -5
Here we have a "collextion of data" relevent to the NSS issue.....which goes to support the notion that by their lack of enforcement and passive neglect, the SEC is therefore guilty of aiding and abetting criminal activities. Since the SEC has failed to take adequate counter measures to stop illegal short selling by members of the financial investment industry, we should be demanding an independent accounting as to the reasons for their years of inaction. National Association of Securities Dealers, Inc. Hedge Fund Manager Hilary Shane Barred May 18, 2005 The Street.com Refco Faces SEC Charges in Short-Selling Probe By Matthew Goldstein May 17, 2005 New York Post The Ionatron Bomb By Christopher Byron May 9, 2005 New York Post Spooky Situation By Christopher Byron May 2, 2005 New York Post Penny Stock Spies By Christopher Byron April 25, 2005 Securities Exchange Commission SEC Charges Former SG Cowen Managing Director with Insider Trading and Fraud Washington, D.C., April 21, 2005 www.sec.gov/news/press/2005-61.htmCasinos, Markets and the Philosophy Of Manipulation Commentary by Bob O'Brien Sunday, April 10, 2005 Fordham University Graduate School of Business Short Selling, Death Spiral Convertibles, and the Profitability of Stock Manipulation By John D. Finnerty Professor of Finance March, 2005 South Florida Business Journal Brokerage tied to a top figure in mob case By Jim Freer March 31, 2005 The Motley Fool Who's Behind Naked Shorting? By Karl Thiel March 30, 2005 Washington Legal Foundation What's Up With The SEC? By Daniel J. Popeo, Chairman March 28, 2005 The National Coalition Against Naked Shorting Windows Media Player tinyurl.com/5vq8yMarch 25, 2005 Check out this independent video news feature that includes amongst others, Dr. Patrick Byrne of Overstock.com, Dr. James Angel, one of the foremost authorities on the capital markets, and Bob O'Brien. The Motley Fool The Naked Truth on Illegal Shorting By Karl Thiel March 24, 2005 New York Post Too Little, Too Late By Christopher Byron March 14, 2005 U.S. Securities and Exchange Commission CIBC Mellon Trust agrees to pay $6 Million for Fraudulent Scheme www.sec.gov/litigation/litreleases/lr19081.htmFebruary 16, 2005 Samex Capital Partners U.S. Stock Market Commentary on "Naked Short Selling" February 7, 2005 The Globe and Mail U.S., Canadian Regulators Charge Trio of Hedge Fund Managers By Michael Flaherty February 5, 2005 Associated Press Jury Finds Elgindy Guilty of Fraud in Stock Scheme January 24, 2005 New York Post NASD Scores in 'Crooklyn' By Paul Tharp January 14, 2005 National Association of Securities Dealers, Inc. NASD Panel Expels Yankee Financial for Fraud January 13, 2005 New York Post Shame on the SEC By Christopher Byron January 10, 2004 United States Department of Justice Florida Internet Stock Promoter Admits Securities Fraud Newark, NJ January 5, 2005 Year 2004 New York Post Feds' Double Take By Christopher Byron December 20, 2004 Christianity Today The Fraudbuster www.christianitytoday.com/ct/2005/001/12.28.htmlBy Rob Moll December 17, 2004 Securities & Exchange Commission SEC, NASD Sanction Knight Securities $79 Million for Fraud December 16, 2004 Triangle Business Journal triangle.bizjournals.comPenny stock tied to Local Fitness Outfit December 10, 2004 The New York Post Weill, Grubman Must Face Suite By Holly M. Sanders December 4, 2004 University of New Mexico Strategic Delivery Failures in U.S. Equity markets Ms. Leslie Boni November 13, 2004 New York Times Judge in Stock Adviser's Trial Bars Testimony on Terrorism By Eric Dash more.....
|
|
|
Post by fastwalker on May 28, 2005 22:53:43 GMT -5
continued.... November 9, 2004 The New York Post FBI Agent Fed Stock Guru Risky Information Staff Reporter November 5, 2004 The New York Times Stock Adviser, on Trial for Fraud, is Portrayed as a Crusader By Eric Dash November 2, 2004 The New York Times Broker who Aided U.S. Going to Trial for Fraud By Eric Dash November 1, 2004 The New York Post Travelzoo's Skidoo By Christopher Byron October 18, 2004 The New York Post Pink Sheets Bluster By Christopher Byron October 11, 2004 The New York Post Gagging the Market By Christopher Byron October 4, 2004 Canada StockWatch CMKM Diamonds mired in outstanding muddle By Lee Webb October 1, 2004 www.thestreet.comHedge Fund Short-Sale Tactic Faces Uncertain Future By Matthew Goldstein September 16, 2004 BioWorld Financial Days of "Naked" Short Selling in Biotech Might be Numbered www.bioworld.com/By Randall Osborne, Editor August 30, 2004 The New York Post Wall Street Scofflaws By Christopher Byron August 23, 2004 The New York Post Pink-Sheets Strumpet By Christopher Byron August 16, 2004 The New York Post Prosecution Fumbles By Christopher Byron August 2, 2004 National Association of Securities Dealers, Inc. NASD Bars scott Ryan, Expels Ryan & Company in Short Sale Probe July 8, 2004 www.faulkingtruth.comWho's Looking out for You? By Mark Faulk June 27, 2004 St. Louis Post Dispatch Rogue brokers resurface overseas By Christopher Catey June 14, 2004 The New York Post PIPE Deals Smoking By Christopher Byron June 1, 2004 The Cincinnati Post Short selling scheme hits from Berlin By Jon Newberry May 29, 2004 The Financial Times Berlin-Bremen listings abuse rules By Norma Cohen in London May 14, 2004 www.financialwire.net DTCC Chief Spokesperson Denies Existence of Lawsuit May 11, 2004 Text of the Lawsuit between Nanopierce technologies, Inc., a Nevada corporation; Stephen Seitz, an individual; and Jane Seitz, an individual, Plaintiffs, - against - The Depository Trust and Clearing Corporation; the Depository Trust Company; and the National Securities Clearing Corporation Defendants. April 29, 2004 Newsday, Inc. Bail yanked for Wall Streeter By Anthony M. Destefano April 19, 2004 TheStreet.com Looking Out for Desperation Finance in PIPEs Deals By Matthew Goldstein April, 9, 2004 Dow Jones Newswires Penny-Stock Company Says SEC Harassing it for Speaking Out By Judith Burns March 19, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Dow Jones Newswires NASD Asks SEC To OK Tougher Short Sale Rules By Carol S. Remond March 18, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) The Financial Times The heat is on for funds' Pipe strategy by Jason Huemer March 15, 2004 National Association of Securities Dealers, Inc. NASD Charges Advantage Trading Group, Inc. and its Trade Desk Manager with Creating False Trading Records to Mislead Investigation www.nasdr.com/news/pr2004/release_04_013.htmlMarch 8, 2004 National Association of Securities Dealers, Inc NASD delays "Naked Short selling" help yet again! February 17, 2004 Canada StockWatch TSX -V firms Global, Union fail on shorting application February 10, 2004 San Antonio Business Journal Two San Antonio firms claim fraud stinging stock By Mike W. Thomas February 2, 2004 Dow Jones Newswires NASD Tightens Short Selling/Delivery Rule Carol S. Remond January 23, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) MoneySense.ca One way to clean up Canadian stock markets by Larry MacDonald January 8, 2004 U.S. Securities and Exchange Commission Comments on Proposed Rule: Short Sales Comments by Russell K. Godwin President, RGM Communications Inc. January 2, 2004 Year 2003 Canada StockWatch SEC bans WAMEX, Absolutefuture promoter DeTrano forever by Brent Mudry December 30, 2003 Canada StockWatch SEC short target, brother face criminal charges in Sedona case by Brent Mudry December 29, 2003 The Financial Times LSE acts to solve Room Service short-selling scandal By David Blackwell December 20, 2003 Dow Jones Newswires Criminal Charges Brought In Sedona Short-Sale Case By Judith Burns December 10, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Business Week Don't Force The Shorts To Get Dressed by Gary Weiss December 8, 2003 The Financial Times FSA probes Room Service short-selling By Elizabeth Rigby December 6, 2003 The Financial Times Shares in scandal-hit Room Service to resume trading By Elizabeth Rigby December 3, 2003 The Globe and Mail Tougher stance urged on Securities Fraud By Patrick Brethour December 2, 2003 The Financial Times Hedge funds fight back against accusations of stock short-selling By Elizabeth Rigby November 29, 2003 The New York Post Hedge Fund Field Day By Christopher Byron November 10, 2003 San Francisco Chronicle Double whammy in stock fraud case: Short sellers trash, then sue, Santa Clara tech firm By Reynolds Holding, Chronicle Staff Writer November 9, 2003 The Financial Post SEC targets ex-CIBC Mellon staffer in Bogus Shares fraud By Sean Silcoff October 25, 2003 Dow Jones Newswires New SEC Rule Could Curtail OTCBB Shortselling By Carol S. Remond October 23, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC known Kelly fraud trial results in hung jury by Mort Lucoff in Miami and Lee M. Webb October 16, 2003 Canada StockWatch SEC target Lancer featured in Kelly Bermuda Short trial By Erik Schelzig in Miami September 25, 2003 Dow Jones Newswires SEC Looking To Overhaul Short-Selling Rules By Judith Burns September 24, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC target Lancer receiver files initial report By Lee M. Webb September 11, 2003 The Street.Com Figure in GenesisIntermedia Scheme Pleads Guilty By Matthew Goldstein September 11, 2003 Canada StockWatch Zi a personal favourite of SEC target Lancer leader By Lee M. Webb September 8, 2003 Canada StockWatch Zi short sellers zapped with forced buy-ins By Lee M. Webb September 5, 2003 Canada StockWatch Zi booster cops a plea in Operation Bermuda Short case by Lee M. Webb August 22, 2003 The PIPEs Report - Painting The Tape by Brett Goetschius Part #1 PIPE Players Accused of Global Stock Scheme July 1, 2003 Part #2 Anatomy of a Naked Short Scheme July 15, 2003 Part #3 Draining the Naked Shorting Swamp August 1, 2003 Dow Jones/Associated Press Defendant pleads guilty in FBI insider trading case July 16, 2003 New York Post The Lancer Papers By Christopher Byron July 14, 2003 Canada StockWatch SEC targets Lauer's Lancer in first big hedge fund case By Brent Mudry July 11, 2003 Dow Jones Newswires Elgindy & 4 others charged again with Insider Trading and Extortion By Carol S. Remond June 30, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC files first suit in GenesisIntermedia debacle by Brent Mudry June 4, 2003 Investment Management Developments SEC Brings Enforcement Action for Manipulating Stock Prices Through Short Sales and Deceptive Covering Practices By Harry S. Davis Winter 2003 Edition New York Post Hedge Fund Hijinks By Christopher Byron April 14, 2003 Canada StockWatch SEC targets Chicago tout Frank Custable by Brent Mudry April 3, 2003 Canada StockWatch TSX member Global's client Elgindy noted in new charge by Brent Mudry March 25, 2003 Dow Jones Newswires Elgindy Case Broadened With New Arraignment By Carol S. Remond March 24, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) more...
|
|
|
Post by fastwalker on May 28, 2005 22:54:04 GMT -5
Business Wire Fresh Del Monte Files Suit Charging Conspiracy to Extort Money March 19, 2003 The Financial Times SEC widens probe into "death spiral" schemes By John Labate in New York March 9 2003 Canada StockWatch SEC fines Rhino $1-million (U.S.) in Amro death spiral by Brent Mudry February 28, 2003 U.S. Securities and Exchange Commission Rhino Advisors and Thomas Badian get exposed www.sec.gov/litigation/complaints/comp18003.htmFebruary 26, 2003 New York Times Penny-Stock Fraud, From Both Sides Now By Diana B. Henriques February 16, 2003 Canada StockWatch Harry Bloomfield and ally Stuart Creggy get probation, fine by Brent Mudry Februrary 11, 2003 Canada StockWatch Pacific International in new Mafia indictment by Brent Mudry February 6, 2003 Red Herring The Shell Game By Christopher Byron January 17, 2003 Red Herring No Safe Haven By Christopher Byron January 17, 2003 The New York Times Online Brokers Fined Millions In Fraud Case By David Barboza January 15, 2003 Dow Jones Newswires Some Small Companies Get Physical To Fight Shorts By Carol S. Remond January 14, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) New York Post Offshore Maelstrom By Christopher Byron January 13, 2003 The Globe & Mail OSC seeks to suspend all of Valentine's trading By Jacquie McNish January 8, 2003 Year 2002 The Globe & Mail Deutsche Bank, Nomura subsidiaries embroiled in lawsuit By Karen Howlett December 23, 2002 Canada StockWatch Valentine's offshore Lemmon flips by Brent Mudry December 20, 2002 Canada StockWatch Chell Group's chairman nabbed in boiler room raid by Brent Mudry December 18, 2002 Dow Jones Newswires Canadian Regulators Review Naked Short Selling By Carol S. Remond and Steve D. Jones December 11, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Investment News Prudential Securities new head's business associates under cloud by Bruce Kelly December 11, 2002 The Globe & Mail Trustee slaps former Thomson Kernaghan staff with suit By Jacquie McNish December 11, 2002 Dow Jones Newswires Some Wall Street Firms to end Trade Processing By Lynn Cowan and Cheryl Winokur Munk December 4, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) The Daily Reckoning The Law of Accelerating Returns by James Davidson November 27, 2002 Canada StockWatch IDA bans, fines Kasman; one Rampart client (Jeffrey Ray Senger) still in jail by Brent Mudry November 19, 2002 Globe & Mail, Report on Business GeneMax battles short sellers By Peter Kennedy, Vancouver John Saunders, Toronto November 18, 2002 Canada StockWatch TSX member Deutsche Bank in major penny stock scandal by Brent Mudry November 14, 2002 Canada StockWatch SEC halts 800America, notorious con man CEO arrested by Brent Mudry November 14, 2002 NASD Fiero Bros. expelled from NASD for Naked Short Selling News Release October 30, 2002 The Toronto Star/Canadian Business Newsmagazine Predator Or Prey? by Matthew McClearn October 28, 2002 Canadian Business Newsmagazine Blame Canada by Mark Brown October 28, 2002 Canada StockWatch BCSC-aided SEC fines Maid Aide rigger $378,000 (U.S.) by Brent Mudry October 21, 2002 Dow Jones Newswires Brokerage Collapse hits Canadian Fund Hard By Steven D. Jones October 18, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch BCSC target Pacific International served dastardly Davis by Brent Mudry October 17, 2002 USA TODAY Mighty Merrill Lynch bogs down in legal troubles by Thor Valdmanis October 10, 2002 Canada StockWatch BCSC paints Pacific International as a cornucopia of client crooks by Brent Mudry October 9, 2002 Inside Wall Street Online Foul Play Among the UAL Shorts? By Gene Marcial October 8, 2002 Canada StockWatch Investment Dealers Association court win underlines Supreme Court landmark case by Brent Mudry October 26, 2002 New York Daily News Spare me because of 9/11 By Greg B. Smith September 25th, 2002 Canada StockWatch BMO Nesbitt has quick deal on table in OSC's Lett case by Brent Mudry September 19, 2002 Canada StockWatch OSC targets BMO Nesbitt Burns as prime bank fraud conduit by Brent Mudry September 18, 2002 The Globe & Mail The Rise and fall of broker Mark Valentine by Jacquie McNish July 8, 2002 New York Law Journal NASD Information Disclosure Lacking by Tamara Loomis June 12, 2002 Year 2001 Hemispherx Biopharma vs. Manuel P. Asensio et al Report by Robert W. Lowry RL Consulting Services Leesburg VA January 31, 2001 more....
|
|