Naked Short Selling
BY: Whenindoubt - June 7th, 2008 - 11:54 AM
+186-59 Have a listen. Sure explains a lot. We need to get up to speed here in Canada
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Re: Naked Short Selling
What are you talking about? not relevant
Re: Naked Short Selling
is there a junior similiar to MEO with 8,000 shareholders, with many who are very interested and aware of the company, you are never screwed if you have an internet connection and are determined, yuri
Re: Naked Short Selling
Great response Vwig, in particular the part of "a lot of "little boys" can make one helluva big boy". I couldn't agree more and that is why the retail investor needs to get educated on this stuff. Unfortunately there is to much between each retialer for us all to come together and if the regulators can't come up with a universal system I would say we are screwed. Well not me and you and some others but the unaware investor.
Re: Naked Short Selling- Universal system
you bring up some great points, there simply is not enough in place to protect the individual investor and yes so many crooks out there used to stealing money..
Many companies do not have access to this type of financing, because there is no basis or fundamental structure that can bring together retail investors as a group. they count on the "big boys". Well, suffice it to say that a lot of "little boys" can make one helluva big boy.
this is so true, and has happened , MEO is a perfect example of this, I"m heavily invested in the deal and never have to worry about liquidity, simply because there are alot of shares out, but more importantly so many shareholders trade the stock,
I think financing is your main issue and yes a tight knit crew of 10 high net worth individuals can really get the ball rolling, very hard to come across, many issues to think about from your post, cheers vwig yuri
Re: Naked Short Selling- Universal system
One of the problems is again the fact that when we ask the authorities to handle something, you can be sure that it will not be done efficiently or in a manner that will be secure. They have made laws and regulations for nearly everything, yet the traders always find ways around them, it seems. They have large legal departments and the amount of money they pull in with this illegal activity has become a fixed column on their income sheet.
The only way of doing anything to protect myself against is by making sure I find out which investment houses are doing it, make a list and simply not invest with anyone dealing with those houses.
Imagine a company being told by investors that they will not be able to attract investors if they deal with investment bankers who are part of the group we do not wish to deal with.
How long would it take if everyone actually looked into this and made it a part of their investment strategy.
I can tell you that if I could pull together groups of individuals with a reasonable net worth and some money to invest, I would be calling up companies asking them to consider not even dealing with investment bankers, but instead with retail investor groups. Many companies do not have access to this type of financing, because there is no basis or fundamental structure that can bring together retail investors as a group. they count on the "big boys". Well, suffice it to say that a lot of "little boys" can make one helluva big boy. Add to that the fact that these little boys will have only one wish..........for the company to achieve its goal, unhindered by the unfair activities that so many are subjected to. That in itself is a great ingredient for a successful campaign.
It seems far out and many would simply say "Gee, that's a tough thing to put together". Perhaps it is, but the benefits would be huge and it would send a clear message to the investment houses that we are tired of the games and the illegal activity. A slap on the wrist is all they get in any case, even when they are caught with their hands in the cookie jar. Steal an apple to feed you family and you go to jail, but rip off a whole sector of the financial markets, and you are usually not caught, and if you are, you get a fine, a reprimand, and continue on your way.
If the investment houses continue and there is no enforcing of the laws, then we are doomed as retail investors. Simple as that. Unless................well, there is strength in numbers.........of that there is no doubt. The question is...how many more times do investors need to be fleeced to understand that they need to group together and counter the unfair practices. Don't count on regulators. They have their own agenda. they are clearly ineffective, because the situation is getting worse, not better. The results speak for themselves.
Right now, there is very little that protects the retail investor in this high risk market, apart from his ability to weed out the bad and reduce his risk by doing in-depth dd.
Imagine the result if this could be done as a group. Something to think about.
cheers,
Vwig.
Re: Naked Short Selling
I agree totally. A universal system is needed to combat this problem.
Re: Naked Short Selling
No I'm not OK with you ruining my lawnmower!! touche Vwig.
The problem with having individual states and provinces dealing with this is that there will be to many discrepencies. Both the US and Canadian government need to make a universal rule against it. Period. I don't understand why it would even be considered. Why? retail investors can't do it. At least I have no idea how they can. The securities commissions were created to take care of us and they need to start doing that instead of letting some greasy broker screw us and great companies.
Re: Naked Short Selling- Threshold list
I needed that otc information. Thanks guys.
Re: Naked Short Selling- Threshold list
Investors can download the threshold list here for the NASDAQ and OTC stocks:
http://www.nasdaqtrader.com/Trader.aspx?id=RegSHOThreshold
If you actually do this for a while, you'll see a lot of the same names popping up constantly.
If you make a note of the investment houses that do not play fair,and stay away from companies who use them you'll reduce your risks further. Include this process in your regular dd. Know which companies are at risk of being manipulated.
cheers,
Vwig.
Re: Naked Short Selling
From the SIOUX CITY Journal....
Ballot initiative targets illegal short selling
SIOUX FALLS (AP) -- An initiative that would impose state penalties for the illegal short selling of stock shares appears to be the first headed to the 2008 ballot in South Dakota.
It's part of a nationwide effort to convince states to pass their own laws against "naked" short selling, which involves selling borrowed shares without having borrowed them first.
The practice is already illegal in the eyes of the federal Securities and Exchange Commission because it tends to lower a company's share price by artificially creating more sellers than buyers. But proponents of state laws against the practice say the SEC is not enforcing its laws so states need to act.
State Rep. Hal Wick, R-Sioux Falls, said South Dakotans for Securities Reform has gathered 27,500 signatures and plans to deliver the petitions to the South Dakota secretary of state on Thursday.
Wick said he knew nothing of "naked" short selling until last March, when Tim Mooney, spokesman for the Union, Mo.-based American Entrepreneurs for Securities Reform, brought it to his attention.
If passed by voters, the law would require stock shares to be delivered to the buyer within three days of their purchase.
"This is a consumer protection issue that needs to be addressed," Wick said Wednesday. "The people of South Dakota deserve to have the protection of both the state and the federal government when they invest their hard-earned dollars in the stock market."
Travis Larson, spokesman for the Securities Industry and Financial Markets Association, said the SEC has addressed the issue and any state law dealing with short selling would likely run counter to current federal regulations.
"The SEC has been given control of our financial market regulations so that we have one single set of rules and regulations for our financial markets," Larson said. "And if every state were to pass its own rules -- some of which may run counter to the SEC -- the patchwork quilt of resulting rules and regulations would tie up our financial markets and slow them, hurting our competitiveness."
Larson added that where short selling occurs illegally, it should be punished to the fullest extent of existing federal law.
In a July letter to the industry association, South Dakota Gov. Mike Rounds said promoters might have good intentions, but the proposed initiative would unduly burden and obstruct interstate commerce.
"The initiative will not receive support from this office and, unfortunately, there is no realistic way to prevent the short sale initiative from appearing on the November 4, 2008, ballot if the proper signatures are obtained," Rounds wrote.
Traditional short sellers borrow a stock, then sell it, betting its price will decline and they will be able to buy it back and return it to their lender at a cheaper price. In "naked" short selling, as defined by the SEC, the seller does not borrow or arrange to borrow the securities in time to "make the delivery" to the buyer within the standard three-day settlement period for trades. It's called a failure to deliver.
Mooney said the practice amounts to fraud, and the American Entrepreneurs for Securities Reform is trying to get similar legislation passed in Oklahoma and Missouri.
"Phantom shares of stock are created in excess of that which has been issued," Mooney said. "It's the same economic impact as putting a $100 bill in the Xerox machine and hitting 'copy."'
"Naked" short selling has received some attention in recent years from Patrick Byrne, chief executive officer of Overstock.com, who has become a vocal critic of the practice. The Salt Lake City-based Internet retailer is suing a stock research firm and hedge fund managers for allegedly driving down the company's shares.
Utah's legislature passed a law against the practice in 2006, but repealed it a year later.
The extent of "naked" short selling is not known.
Mooney estimates that as much as $6 billion a day worth of stock is not delivered, but he added that some of that is fixed over time.
Other business analysts contend the issue is overblown.
Failures to deliver can occur for a number of reasons, including human or mechanical errors or processing delays, and they can occur on both long and short sales.
Wick said he wasn't sure how prevalent the practice is in South Dakota, but he said he knows of one company in the state that has been impacted by it. He said he did not want to name the company.
But startup companies need protection against the practice so brokerage firms can't drive them into bankruptcy, Wick said. The conversion of the old Homestake gold mine in Lead into an underground laboratory will draw many startup companies to the state, he added.
Asked why he didn't introduce the bill in the Legislature rather than using the ballot initiative process, Wick said short selling is not the kind of issue that would otherwise get a lot of media attention.
"The things that go through the Legislature, most people never see," Wick said. "By doing this publicly and asking the people to vote on it, we let the people of South Dakota really say what they want."
Mooney said state efforts will also help get the attention of the SEC, which can then better enforce its laws.
Wick said he hasn't had any discussions with the South Dakota Attorney General's Office on how it would handle enforcement of the proposed law, but it would fall under the state's consumer protection division.
The ballot measure is titled the South Dakota Small Investors Protection Initiative.