Stockgate - Naked Shorting Scandal

» BoltonCT - Re: Reg SHO to Start Jan 3, 2005

Since it is an illegal practice to short sell shares that have not been affirmatively determined to exist why would the SEC want to create a short squeeze and call attention to their previous lack of enforcement and hurt a lot of individual legal investors in a short squeeze?

Wouldn’t it be more prudent to go after the culprits and fine them instead of adding yet another instability to the financial markets? This would not be just a potential instability it would be a definite shake-up.

Frankly I don’t believe the SEC would do such a stupid thing. First, if this is true, how is the SEC passing this information on to you and then on to us… any different from the kind of inside information that put Martha behind bars? So now that we heard the inside information we can’t act on it right?

Sounds like a rumor started by someone who is afraid the current market bubble has already popped. If the SEC did such an irresponsible thing it would hasten the return of the secular bear. What the market has lacked this year is cash flow. It needs value to attract cash. Individual investors like the ability to move in or out without the SEC or other MM price manipulators creating instabilities such as bubbles or short squeezes. So if the problem has been a dearth of equity value, a large dose of instability will not make matters better. Perhaps it would even cause a panic as MM’s default and drag us all into a spiral. It looks like Warren Buffet and George Soros are going to be attacking the dollar at about the same time.

Sorry, I think the SEC is a lot smarter and will not risk causing a panic. When we hear things like what you are saying, people like me think about getting out of the stock market altogether until some semblance of sanity returns.

-- posted by BoltonCT

» BoltonCT - Re: Reg SHO to Start Jan 3, 2005

We now have two more good reasons for getting out of the stock market. One is the chance the above SEC rumor of a massive market-wide simultaneouse short squeeze is true. The other reason is the chance the SEC rumor is not true.

If it is true, the more I think about the possibility of the SEC sponsoring a short squeeze starting Jan 3, the more convinced I become that the week of Jan 5 will be the beginning of a major sell-off of 2005. If that rumor were true, Illegal MM’s will go bust and innocent investors will be dragged into the quagmire.

First, the whole reason the MMs are illegal is because they don’t have the money to do due diligence and borrow the shares. So obviously they would default in a short squeeze. Secondly, if more shares are shorted than are in public hands then the other honest investors go down the tubes too because there would have to be multiple claims of ownership for the same shares. Our money would be tied up in courts for years as brokers and dealers would get sucked into the spiral because they are responsible for certifying that the shares are available for shorting. No order can be legally executed without checking first.

With a wall street panic like that in January and two of the richest Americans talking about shorting the dollar, 2005 could easily be a repeat of 2000 and 2001 combined. In 2000 we had credibility as the world’s financial citadel. We saved the world economy when Japan imploded in 1990 and again when Asian rim economies imploded in 1997-98. Who will save us, Buffet and Soros? They both dislike President Bush so much they might just be willing to take us all down with him. Many people already blamed George Soros for the Asian debacle of 1997-98. A lot of little people were hurt by currency speculation then. Soros does not like to lose. In mid 2000 he wisely got out of technology stocks and said,
“Markets are extremely risky, and in some ways I think the music has stopped—only most people are still dancing.”

That is how I see the market now with cash flowing out and prices still dancing.

A possible SEC induced panic in January could cause many more billions in damage than the terrorists did on 9-11. One president caused a small panic in the 60s just by jawboning industry about prices. I parked my money and was thinking of getting back in when the market corrected. During Xmas of 1999 I felt as I do now and I got out of the market for two years then.

But if the SEC rumor is not true (and I hope that SEC rumor of creating a massive U.S. stock exchange short squeeze is not true) then that means some investors are now desperate. If it is not true why would people spread the rumor unless they thought a short squeeze was the only way to get prices up so they can profit in 2005. That would imply that they have no hope for 2005 and even price chaos is appealing to them.

Therefore the SEC short squeeze rumor now gives us two more good reasons for getting out of the stock market. First, the SEC rumor may be true and they will creat a massive market-wide short squeeze. Secondly, the SEC rumor may not be true and normally thoughtful investors feel hopelessness.

-- posted by BoltonCT

» Kirk - Death of an Investment Class

Ever wonder what would happen if our distressed neighborhoods were never policed? How about if our local news team failed to report crimes in any location other than our upscale neighborhoods? Do you think the US would be the country we are today? What would happen when the criminal elements were forced to migrate into the next levels of our neighborhoods? Eventually where would it end? It would merely be a reflection of our beginning. We would be back to the days of the un-policed Wild West.

In our securities markets, that is exactly what is taking place and the affects are alarming. The Markets are becoming a place of the “Have and Have Not’s” whereby the “Have’s” prey at will on the “Have Not’s” as our Federal Govt. sits back and watches it happen in real time. The growing separation of wealth in our country is only paralleled by the equal separation of rights to a fair market. The media themselves have entered into this bias as most refuse to report on our markets lower class victims. It’s all about power and who pays the bills. Forgotten is that our markets have more lower and middle class investors than ever before. They too buy subscriptions to these publications trying to understand it all.

Today our Securities Industry has over 4000 publicly traded companies that trade on the Over the Counter Bulletin Board (OTCBB) and Pink Sheet quoting services. This number is only slightly smaller than the near 6000 that trade on our better-known markets. These companies have tens of millions of investors with most being the innocent victims to Wall Street’s greed and abuses. There are very few Institutions that will buy these smaller securities so the investors here are nearly all retail class investors. While Wall Street and the media like to snub their noses at these companies, Wall Street is certainly willing to take the money from those millions of investors who invest in these securities. It is easy picking. It is also financially lucrative.

These companies, penny stock and micro-cap stocks, are not your GE’s or IBM’s, they do not have the charisma of Microsoft or Google, but they are public companies nonetheless. At least were trying to be at one point in time although now some are nothing more than mere shells. Even like the big-board companies some are ethical and some are downright frauds. The investors in these small companies are your local grocery man, car dealer, and engineer. The nurse you go see and the homebuilder you contract are all investors. Sometimes even aides to Congressman and Congressman themselves are such investors as I have been recently informed. These Investors are real people and they are violated people. Our Nations people. These stocks being traded are at values less that $5.00/share and most at $1.00/share or less. But these are the affordable stocks to our working class. After all, how many Google shares can the local teacher really purchase?

Today, it is reported that 1000+ publicly traded companies are being violated by Wall Street’s failure to follow established laws. I am not the one admitting the rules were broken. According to one General Council on Wall Street it has been the regulators telling Wall Street behind closed doors about their failure to follow established laws. It is the cops on the beat handing out warnings instead of tickets time after time after time and then watches as the same driver speed off yet again.

Trades, all trades, are required by law to settle between a buyer and a seller whereby money is exchanged for certified shares issued by the company delivered. It is Securities Law passed down by Congress in the Securities Acts of 1933 and 1934. Instead, Wall Street has ignored settlement laws and flooded the market with non-pedigreed shares; counterfeit shares. Wall Street will take an investors money but delay receipt of delivery on that share. Instead the Investor will get an IOU, that looks identical to a real share, and that IOU will only be exchanged when it becomes cost beneficial to the Wall Street firms to do so. It is the Wall Street’s version of the 3-card Monty played on our cities street corner. The SEC has all but admitted to this fact and has watched the unprotected become violated.

Back to that list – the validation point.

In the list of 1000+ companies reportedly trading with excessive settlement problems there are 50 – 60 NYSE, 100 AMEX, and 100 NASDAQ Securities. These 250 securities represent maybe 3% of the number of publicly traded issuers in these markets. These are your assumed higher and middle tier companies in these markets. On the other hand, 800+ OTCBB and Pink Sheet securities trade with similar settlement abuses. These 800 companies are trading at much higher ratio’s of failure percentages to registered shares than the 250 larger securities as reported in a document written by a visiting scholar to the SEC. These 800 securities represent over 26% of the list eligible securities traded in these quoting services. More than 1 in 4 companies of these companies are having settlement problems.

The NYSE companies that are listed as troubled securities can be located at www.nyse.com/threshold . The other firms, from other markets and services, are not available to the public but have been made available to some on Wall Street. Some of the more premiere firms have been receiving the list from the regulators ahead of the investing public for over a month. The rationalization has yet to be seen as to why regulators would provide non-public inside information to Wall Street. The Risk vs. Reward here cannot be seen. On that list, however, are stocks many of us own.

Understand in all this that settlement failures are not an abuse by the criminal elements. This is not a gang war in a depressed section of town where the criminal feeds off yet another criminal. This is a situation where the millionaires are the ones coming downtown to conduct the robberies and then going home to their mansions. It is Wall Street that fails to settle our trades not the issuers and not the lower and middle class investor who are putting up the cash to purchase these securities. It is Wall Street that carries our settlement failures on their books and it is a Wall Street run Self Regulatory Organization, (DTCC) which hides the evidence from the investing public. Ultimately, it is the small investor who is left with an empty account in a rigged marketplace. That is why it is allowed to happen. Power! Transfer of Money!

Our Nation continues to operate in this moral and ethical crisis.

Our class wars continue to grow as the wealthy want more than they will ever need at the expense of our working class who do need it. The recent corporate scandals demonstrate the length executives will go in committing a white-collar crime. The recent securities scandals also prove that the markets need investors or the markets will crash. As investors pulled out over recent dis-satisfactions, corporations lost market capitalization. The investors pulling out were not just the wealthy, it was all of us. Investor sentiment is already fragile and retail investors can no longer afford to be the financial pawns for the greedy. The economy needs us. We are the buyers to the American products.

Does anybody really think Morgan Stanley and Merrill Lynch would survive if every middle class investor pulled their money from the markets because they could not trust the system to protect them? Can our nation, and the markets, survive if our lower and middle class households dissolved into one of little economic value? Who will build our houses, design our latest technology, or protect our streets and teach our children? Do we really think this nation could survive off a select few wealthy white-collar executives and a house full of Politicians? If you do lets give it a try. Lets all quit and let these millionaires and politicians pay the taxes that support our lives. Lets put them all to work again.

Today I was informed by a reporter of a financial publication that the robberies taking place against millions of small investors was not a reportable story because of the pedigree of the companies being abused and manipulated. The editor is not interested in these stories as there is no big name fanfare that comes with such a story. Money buys subscriptions and you must report to the money. Instead the media would rather report the same story as 100 others media outlets if it involves people of power and money. Most being names only they would know. The reporter who stated this forgot that reporting is not just limited to the elite. The local TV news team still reports the killings in our distressed cities even though it is far from our safe neighborhoods. They have to because it provides us a view of how lucky we really are. Integrity!

Eight Hundred small business issuers, millions of investors, all being manipulated out of their investments and it is not a story to Wall Street reporters because the people abused have no political clout. These abused people do not exist but to pay takes and provide the manual labor so white-collar America can shine from their domiciles. Millions of taxpayers are being violated by a failed Regulatory agency their tax dollars pay to maintain.

Will the death of an Investing Class be acceptable to our economy? I do not hold such answers. I can only ask this – Have we done our homework to know before we kill them off? Our leaders have made some very big mistakes over time because of their inability to predict correctly future results. I suggest the present leadership ensure their analysis before they feed us all to the wolves on Wall Street.

Passing quote to all:

"You have to leave the city of your comfort and go into the wilderness of your intuition. What you'll discover will be wonderful. What you'll discover will be yourself."
- Alan Alda

(Editor's Note: If you haven't already, go to www.investigatethesec.com and sign the petition. This issue will soon be in the forefront of the media, please help us to make this a reality. To enact positive change requires positive actions.)

Add your name to our "Stockgate activist list" at info@faulkingtruth.com. We will email you only when we have new articles or information dealing with this issue. Please link the articles everywhere you can, post them on stock message boards, and send them to the appropriate public entities. To enact positive change requires positive action.

-- posted by Kirk

» Kirk - Spotlight On Illegal Naked Short Selling

Jan 10, 2005 (financialwire.net via COMTEX) -- (FinancialWire) Regulation SHO, the U.S. Securities and Exchange Commission effort to make a Federal case out of illegal naked short selling, is here, and it is turning a broad spotlight on brokerages' failures to deliver stock certificates purchased from them by investors that appears to be much brighter and more intrusive than either the detractors had expected or perhaps the market makers used to minimal accountability had wanted.

As of press deadline almost 500 public companies, including Delta Air Lines (DAL), Taser International (TASR), Netflix (NFLX), and Isonics (ISON), had ended up on the new "threshold lists" maintained by the New York Stock Exchange, NASDAQ,. American Stock Exchange and other exchanges in response to the requirements of Regulation SHO, and companies on the list may turn into super-volatile trading opportunities this week and in the weeks ahead.

The lists, at http://www.nyse.com/threshold, http://www.nasdaqtrader.com/aspx/regsho.... http://amex.com/amextrader, and elsewhere,reportedly show 73 securities on the NYSE list, only 9 of which are U.S. companies, 70 securities on the AMEX list, 22 individual companies, and 374 stocks on the NASDAQ list, including 96 on the exchange, 29 OTCBB and 254 on the Pink Sheets.

NASDAQ initially missed its Friday night deadline, and Dow Jones' (DJ) Wall Street Journal said the list is "far from complete as it stands." NASDAQ apparently has until noon today to complete the list.

Regulation SHO was advertised as a solution to what some have said could be the biggest scandal in the history of the securities industry, and regulators have drawn significant fire from both sides of the short selling camp, although "naked" short selling, where short sellers have almost unlimited abilities to sell securities many times over the number of shares outstanding, has long supposed to have been illegal.

The controversy has drawn both legislative and judicial proponents and opponents, and until the Tsunami took over the news, General Electric's (GE) "Dateline" was said to be on the verge of a major expose that will reportedly touch on possible collusion between brokerages that are purportedly impossibly behind in their fails to deliver certificates, the Depository Trust Corporation, whose "Stock Borrow Program" reportedly garners it almost a billion dollars a year in fees for what detractors call "counterfeit trades," and even the vaunted U.S. Securities and Exchange Commission itself, which makes a fee on every stock transaction, whether legitimate or not.

There is even a blog on the subject, at http://nakedshortingforum.blogspot.com/ .

A poster on the Yahoo (YHOO) message boards said that due to the new threshold rules, now being implemented, "the pressure is on the market makers to do what is right because all eyes will be placed on them. There will be many key Federal Authorities, economists, mathematicians, etc. that are already lined up to be performing certain studies for historical purposes. All the MMs have to do to not make matters worse is to do what is right and fix what they had broken for years with any fully reporting company that's a threshold security as soon as possible."

The poster noted that a stock must be fully reporting and considered a threshold security. A threshold security is one where .5% of its outstanding shares (OS) have been proven to have been naked shorted for 5 consecutive trading days and where the MMs have failed to close out those positions for five consecutive trading days.

"Example: If stock ABCD had 2,000,000 shares outstanding and was a fully reporting company as of 3 Jan 05, the MMs would need to fail to close out the open naked shorted position of .5% of 2,000,000 shares which would equate to 10,000 shares not being "completely" covered for 5 consecutive trading days. This means that the MMs would need to make sure they don't allow 5 consecutive days to happen where they leave any balance remaining of the 10,000 naked shorted shares as an open account of stock ABCD. They must 'completely' close all open accounts of naked shorted positions.

"When the supply of shares of a stock is zero, the supply is zero. It doesn't matter how you get there, be it by a naked short position or by the float being absorbed. This is where it all starts as a short squeeze will now be formed and grows as demand to purchase shares increase. This is where the misperception exists with Regulation Sho. People think that a new naked short position has to be created for a stock to be eligible for protection and rectification under Regulation Sho. This is not true. It's even better. All naked short positions of the past will not go away and must be dealt with. The clock begins ticking for covering, and means that any stock that has been naked shorted will automatically start out in a forced short squeeze mode that will only escalate the longer the MMs wait to cover.

"Any buying pressure will cause the increase of the naked shorted position to grow to begin approaching the 5 day consecutive window of not getting covered by the MMs. After the 5 days transpire where the MMs have failed to deliver and close the open naked shorted position, that stock in which they failed to deliver will be placed on a Threshold Security List for the public to view. This is where it starts to get awesome," said the post.

"With no buying pressure, they won't have to cover as soon as one might have hoped as shares are sold exceeding the amount of shares being bought for stock ABCD. Still, if they don't cover the 'entire' naked short position for 5 consecutive days, stock ABCD will show up on the Threshold Security List for the public to view on 10 January.

"After such, the MMs have 13 days to close out the 'entire' naked shorted position or face being suspended and/or shut down from that security and other penalties to possibly put that MM out of business. The end result will still be the supply being zero and the stock would be forced to be traded correctly based on supply and demand with an already dried up supply. This means the creation of an instant short squeeze!"

The poster said that the market makers will need to get the naked shorted shares out of circulation by increasing the bid to entice shareholders to sell. "The problem comes when they allow for the buying to outweigh the selling due to increased demand for the stock. As orders are placed to buy shares, they must be filled by the MMs. This will worsen their problem when nobody is selling. As the MMs make the mistake and allow for any stock to be placed on the Threshold Security List, it will publicly reveal where the MMs are already having a problem in covering. Us as shareholders will see this list and contribute with forcing the short squeezes for every stock on the list."

The recent Securities Industry of America symposium on Regulation SHO, which was supposed to curtail illegal naked short selling, only further deepened the U.S. Securities and Exchange Commission divide as a dramatic ' some say startling ' new 22-page working paper, "Strategic Delivery Failures in U.S. Equity Markets," was published.

Moderators at the symposium included Steven Kessler, Associate General Counsel for Goldman Sachs & Co. (GS), and Deborah Mittelman, Deputy Director of Global Compliance for Reuters' (RTRSY) Instinet. Panelists included Jeffrey Bernstein, Senior Managing Director of Bear Stearns (BSC), and Robert O'Connor, Executive Director of the Law Department for Morgan Stanley (MWD).

The referenced working paper by University of New Mexico Professor Leslie Boni was initiated while the author was visiting financial economist at the SEC.

She termed the "failures to deliver," which litigants have called "counterfeiting," as being "pervasive."

The professor said that a whopping 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC's threshold limits for failures.

The standard for settlement is presently 3 days with a concept proposal by the SEC in comment to reduce 3 day settlement to 1 day, noted Patch.

The economist pointed to a study conducted by Evans, Geczy, Musto, and Reed in 2003 that provided evidence that while the SRO's have buy-in requirements, such buy-ins almost never occur. She noted that an audit of one market maker showed that all or a portion of shares in 69,063 transactions during 1998-1999 were "fails to deliver."

"The market maker was bought-in on only 86 of these positions," she stated.

Dave Patch, editor of "Stockgate Today," said that his own review of the Securities Acts of 1933 and 1934 finds no reference to "strategic failures." In fact, he said, Section 17a of the 1934 act "mandates prompt and accurate clearance and settlement of trades, and the admission of Strategic Failures is also in direct violation of Rule 15c6-1."

Rule 15c6-1 defines the settlement cycle for trades executed and states that no Broker Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. For market making activities there is a slight exemption from the delivery in a Bona Fide Market Making activity but as the SEC and SRO's have repeatedly stated, Bona Fide Market making is not simply supporting the best offer in a naked short sale without also representing the best bid or near best bid in a long trade. They must be actively making a market on both sides of trading to use the exemption, noted Patch.

Delegates to the September 20 annual SEC Forum on Small Business passed several resolutions on the issue to be submitted to the SEC. Among them were:

1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.

2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.

3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.

Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed "serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets."

Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau

of Economic Research, the Brookings Institution, and Harvard University.

Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as "long," "short" or "short exempt." More important, he said, the new "locate and delivery" requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are

widely applied and strictly enforced.

"Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales," Shapiro charged.

Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was "unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy."

"Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars."

Shapiro urged the SEC to "reconsider the provisions of Regulations SHO and, at a minimum, apply the 'locate and delivery' requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for."

Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its "stock borrow" program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.

Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice."

In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.

He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the "sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy."

Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O'Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.

According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.

The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in "custody."

According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the "Stock Borrow Program."

The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. "There are numerous cases of a single share being lent ten or many more times," giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.

"Such re-hypothecation has in effect made the potential 'float' in a single company's shares virtually unlimited and the term 'float' meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence." Burrell said the Christian/O'Quinn lawsuits will seek to show that the "counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the 'Sale of Unregistered Securities'."

One lawsuit alleges that the DTC has a colossal disincentive to stop the "stock borrow" program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.

Further, the suit alleges that "open positions" resulting from this activity at the close of business on December 31, 2003, "approximated $3,025,467,000" due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC's "Stock Borrow Program." The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined.

The Depository Trust and Clearing Corp.'s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (NDAQ) and the embattled American Stock Exchange!

In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:

They include Bradley Abelow, Managing Director, Goldman Sachs (GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (C); Michael C. Bodson, Managing Director, Morgan Stanley (MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);

Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (JPM).

In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.

In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition."

The new "threshold lists" could make for an interesting January, and possibly, an interesting 2005.

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-- posted by Kirk

» Kirk - SHO Listings Disappear????

Regulation SHO Threshold List Gets Confuser and Confuser As Listings 'Disappear'

Jan 18, 2005 (financialwire.net via COMTEX) -- (FinancialWire) Is it a bird, or a plane?

Regulation SHO seems anything but Superman as it is confusingly played out at the NASDAQ (NDAQ) trader site, whose latest oddity is the sudden and inexplicable disappearance of all but one Pink Sheets listed Company, MPTV Inc (MPTT), and all but nine companies listed on the OTC Bulletin Board on its widely publicized "threshold list."

Some companies, such as Isonics (ISON) and Taser International (TASR) might have expected to be listed on the now almost decimated list of only 110 securities, but the sudden disappearances are surprising, especially as most observers of naked short selling expected the list to be many times what it has been so far, and have no idea what happened to companies representing the largest trading platforms, widely expected to contain hundreds if not thousands of "failed trades."

Some detractors have just thrown up their hands, calling the whole thing a "charade," planned from the beginning, especially since the original listings just ignored the claimed millions of over-the-threshold "fails" that pre-existed.

"The pre-existing fails were just so far out of control to be beyond comprehension," said one, "perhaps enough to bankrupt the entire financial industry, so it is not surprising the regulators just 'grandfathered' those into the system, in effect wiping them out and starting fresh."

Others believe the lists and everything associated with them should have been and should be fully transparent. David Simon, chair of Smart Chip Technologies (SCTN) said his company's appearance, before it was among those that mysteriously vanished, on the threshold list, was "expected" but wanted to know how the company could "find out the amount of naked shorts outstanding?"

"Trading securities without ever settling is the selling of counterfeit stocks," said David Patch, editor of Stockgate Today electronic newsletter. "General Electric's (GE) CNBC reporter Ron Insana called this manipulation on his Friday Street Signs show."

According to Patch, Regulation SHO requires the release of "threshold securities" by each market center based on a simple calculation. Failed trades are calculated as a percentage of totals outstanding and if the percentage exceeded .5% of the outstanding for 5 consecutive trading days your company was required to be listed. The list, by SHO, is required to be published daily and those companies on the list would remain there until such time as the fails are brought below abusive levels for a similar 5 consecutive trading days. The data used to create the list comes from the industries central settlement system itself the National Securities Clearing Corporation (NSCC).

The threshold list has been published since January 10, and there have been questions about the list since it began. Hundreds of companies that were listed on FinancialWire after they claimed over the past year or two that their trading reflected patterns suspected of being illegal naked short sales, and none of the companies sued by the O'Quinn law firm that has sued the Depository Trust Corporation (DTCC).

According to Patch, the listings so far have been unsatisfactory and even not believable. For instance, pink sheets companies that were non-reporting were supposed to be omitted from the list, but he said as many as six that had been delisted by the SEC for failing to maintain proper finings, such as Infotopia and Dr. Koop, were mysteriously included. So were companies that had ceased trading altogether.

Says Patch: "When the SEC de-listed Infotopia, Dr. Koop, and some 80 other Pink Sheet Companies over these past few months they were notified of the possibility that these companies were driven into financial ruins by illegal trading of counterfeit securities. Wall Street was overselling these securities and driving the stocks into oblivion. They oversold without and cause or concern for settling trades because the SEC was going to assist them by shutting these companies down. Wall Street was ignoring their obligations, under the Securities Acts of 1933 and 1934 to properly seek out and obtain a certified share for the investor and the de-listings would create the virtual impossibility to settle the trades. The data would be captured forever that illegal shares were sold. With the recent publication of the NASDAQ's list, the NASDAQ disclosed the fraud."

Patch also wants to know if the companies with extended fails that persisted prior to the implementation of Regulation SHO will ever have to be settled. "For how long will the SEC allow these fails to stay on the books because the members refuse to seek out real shares in the open market to settle what they sold?"

Prior to the mysterious vanishings, the list at http://www.nasdaqtrader.com/aspx/regsho.... , initially included 374 stocks on the NASDAQ list, including 96 on the exchange, 29 OTCBB and 254 on the Pink Sheets.

General Electric's (GE) "Dateline" is said to be on the verge of a major expose that will reportedly touch on possible collusion between brokerages that are purportedly impossibly behind in their fails to deliver certificates, the Depository Trust Corporation, whose "Stock Borrow Program" reportedly garners it almost a billion dollars a year in fees for what detractors call "counterfeit trades," and even the vaunted U.S. Securities and Exchange Commission itself, which makes a fee on every stock transaction, whether legitimate or not.

The recent Securities Industry of America symposium on Regulation SHO, which was supposed to curtail illegal naked short selling, only further deepened the U.S. Securities and Exchange Commission divide as a dramatic ' some say startling ' new 22-page working paper, "Strategic Delivery Failures in U.S. Equity Markets," was published.

The referenced working paper by University of New Mexico Professor Leslie Boni was initiated while the author was visiting financial economist at the SEC.

She termed the "failures to deliver," which litigants have called "counterfeiting," as being "pervasive."

The professor said that a whopping 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC's threshold limits for failures.

The economist pointed to a study conducted by Evans, Geczy, Musto, and Reed in 2003 that provided evidence that while the SRO's have buy-in requirements, such buy-ins almost never occur. She noted that an audit of one market maker showed that all or a portion of shares in 69,063 transactions during 1998-1999 were "fails to deliver."

"The market maker was bought-in on only 86 of these positions," she stated.

Dave Patch, editor of "Stockgate Today," said that his own review of the Securities Acts of 1933 and 1934 finds no reference to "strategic failures." In fact, he said, Section 17a of the 1934 act "mandates prompt and accurate clearance and settlement of trades, and the admission of Strategic Failures is also in direct violation of Rule 15c6-1."

Rule 15c6-1 defines the settlement cycle for trades executed and states that no Broker Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. For market making activities there is a slight exemption from the delivery in a Bona Fide Market Making activity but as the SEC and SRO's have repeatedly stated, Bona Fide Market making is not simply supporting the best offer in a naked short sale without also representing the best bid or near best bid in a long trade. They must be actively making a market on both sides of trading to use the exemption, noted Patch.

Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed "serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets."

Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau

of Economic Research, the Brookings Institution, and Harvard University.

Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as "long," "short" or "short exempt." More important, he said, the new "locate and delivery" requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are

widely applied and strictly enforced.

"Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales," Shapiro charged.

Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was "unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy."

"Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars."

Shapiro urged the SEC to "reconsider the provisions of Regulations SHO and, at a minimum, apply the 'locate and delivery' requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for."

Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its "stock borrow" program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.

Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice."

In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.

He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the "sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy."

Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O'Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.

According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.

The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in "custody."

According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the "Stock Borrow Program."

The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. "There are numerous cases of a single share being lent ten or many more times," giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.

"Such re-hypothecation has in effect made the potential 'float' in a single company's shares virtually unlimited and the term 'float' meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence." Burrell said the Christian/O'Quinn lawsuits will seek to show that the "counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the 'Sale of Unregistered Securities'."

One lawsuit alleges that the DTC has a colossal disincentive to stop the "stock borrow" program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.

Further, the suit alleges that "open positions" resulting from this activity at the close of business on December 31, 2003, "approximated $3,025,467,000" due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC's "Stock Borrow Program." The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined.

The Depository Trust and Clearing Corp.'s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (NDAQ) and the embattled American Stock Exchange.

In their comments to the SEC regarding Regulation SHO in January, 2004, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.

In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition."

For up-to-the-minute news, features and links click on http://www.FinancialWire).net

 
                  Kirk   S&P500  NASDAQ 
2YR: 12/31/2002   +69%    +41%    +63%
4YR: 12/31/2000   +35%     -3%    -12%
6YR: 12/31/1998  +160%      7%     -1%

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» Kirk - 70M Shares Trade With No Float!

Ripley, Believe It Or Not: 70M Shares Trade After Michigan Man Puts Them All in Sock Drawer

March 4, 2005 (FinancialWire) A Michigan man, Robert C. Simpson, who claims to have acquired 100% of the issued and outstanding stock of Global Links Corp. (OTC: GLKCE), if true, is likely to become the poster boy for those opposed to illegal naked short sales.

March 4, 2005 (FinancialWire) A Michigan man, Robert C. Simpson, who claims to have acquired 100% of the issued and outstanding stock of Global Links Corp. (OTC: GLKCE), if true, is likely to become the poster boy for those opposed to illegal naked short sales.

Illegal naked short sales have mostly victimized small companies such as Global Links, but has also been cited as problematic for large companies such as Martha Stewart Living OmniMedia (NYSE: MSO), Krispy Kreme Doughnuts (NYSE: KKD) and Overstock (NASDAQ: OSTK), whose CEO is said to have helped write a national ad on the subject in the Washington Post directed to President George Bush.

Simpson filed a U.S. Securities and Exchange Commission Schedulce 13D (http://xml.10kwizard.com/filing_raw.php?... on February 3, showing his purchase of and sole voting power for 1,158,209 shares of the corporation.

Yet, here’s the rub:

The day after Simpson purportedly stuck every last corporate certificate for Global Links in his sock drawer, the company traded 37,044,500 shares. The next day it traded 22,471,600 share. Thursday it traded 199,616.

Simpson is said to have gone back to his sock drawer, and despite the fact that a sock or two, as is always the case, were missing, all 1,158,209 Global Links certificates were still there.
Observers are asking where those other millions and millions of certificates are therefore coming from.
Hmmmmm.

The San Antonio Express-News raised the question this week as to how Congress could seriously consider placing Social Security into what it inferred is a “mess.”

For up-to-the-minute news, features and links click on http://www.financialwire.net

FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp

-- posted by Kirk

» arommel88 - Re: 70M Shares Trade With No Float!

This is as bad as it gets. The whole market system works by funneling money to the next best thing. Now these companies cannot raise money because of these leeches. Its a corrupt rat pack doing a round of shots from our nation's spinal fluids.

I have a small bet on JOSB and this certainly has me wondering about the nature of its large short interest.

-- posted by arommel88

» azxcvbnm - Re: Re: 70M Shares Trade With No Float!

This news is absolutely shocking and disturbing. What's even more shocking is that I've never seen an article on it outside of these forums. No commentator ever mentions this, yet the ramifications are huge!

I have the feeling that I've just seen an UFO, but no one takes me seriously or cares.

-- posted by azxcvbnm

» Kirk - SMOKING GUN!!! Stockgate Goes to Congress

Stockgate Goes to Congress

by Mark Faulk

Congress finally took the first steps towards addressing the naked short selling issue known as "Stockgate" yesterday when, in a whirlwind week that began with a major court ruling in a lawsuit pertaining to naked short selling, gained momentum when a Michigan man provided Congress with a clear "smoking gun", and culminated with Senator Robert Bennett telling SEC Chairman William Donaldson in a Senate hearing that "Rule SHO is not working".

Letting the Courts Decide

In what attorney Wes Christian described as "a significant victory in our on going battle to bring restitution to our clients for the brazen manipulations that were perpetrated against them", a New York court last week ordered the Depository Trust and Clearing Corporation (DTCC) to produce trading records for shares of Eagletech Communications (OTCBB: EATC). Eagletech, who was represented in the motion by Christian Smith & Jewell of Houston, Texas and Koerner Silberberg & Weiner, LLP, of New York City, is a plaintiff in a stock manipulation action pending in the state of Florida. It commenced a special proceeding in the Supreme Court of the State of New York to obtain certain trading reports from the Depository Trust and Clearing Corporation.

It was the first major ruling against the DTCC in the naked short selling scandal, and could open the door for other similar rulings in the dozens of cases filed by Christian, famed attorney John O'Quinn (of the Houston law firm of O’Quinn, Laminack and Pirtle), and others on behalf of companies and investors who claim that they have been victimized by naked short selling. Christian and O'Quinn have also won favorable rulings on on behalf of Exotics (OTCBB: EXII).

The Smoking Gun

In what was the most significant development this week, a Michigan man, Robert C. Simpson, claimed to have acquired 100% of the shares of Global Links Corp (OTCBB: GLKCE), filed his purchase with the SEC, had the certificates delivered to him, and then watched as over 50 million shares traded over the next two days. In fact, GLKCE traded another 447,000 shares just yesterday. How did major brokers buy and sell tens of millions of shares of stock in a company that had zero shares available? It's a question that the SEC, the DTCC, and the brokers themselves will have to answer in the coming weeks.

And, if that wasn't enough, another investor, Paul J. Floto of Dallas, Oregon, bought another 15% of Global Links' stock just his week, and filed his shares with the SEC as well, even though Simpson had filed his claim to 100% of the shares of the same company a month earlier. This is how Floto described his purchase in his SEC filing ( http://xml.10kwizard.com/filing_raw.php?... ):

"On February 3, 2005 a single investor reportedly purchased all the common shares issued by the company, plus 145 additional unissued shares.

Subsequent to that date, over 95 million shares, or over 82 times the total shares issued, were reportedly traded, none of which were reportedly sold by the 100% owner of the common stock.

On March 4 and 7, I purchased a total of 180,000 shares, resulting in my obtaining 15.54% ownership of a stock reportedly already 100% owned by another investor. I assume that there may be additional investors who may also claim ownership of common shares of this company.

I have requested that certificates be issued to me representing my full 15.54% ownership interest, to protect my right to vote and enforce any other claims that may accrue to an actual documented owner.

I understand that Reg. SHO was supposed to detect and prevent the fabrication of millions of nonexistent shares. It would appear that my securities purchases prove that Reg. SHO has been systematically violated by market-making brokers and securities-clearing firms.

From time to time I may continue to purchase additional securities on the open market to increase my ownership interest to up to 100% of the company's common stock to give me an ownership interest equal to that of the current 100% owner."

Major Media Coverage

While this has been largely a grassroots effort in the past, with only a handful of publications covering the story, including www.faulkingtruth.com , www.financialwire.net , www.investigatethesec.com , and Judith Burns of Dow Jones, there has been an upsurge in media coverage lately, as the major media has finally begun to recognize the significance of the story. But while media outlets such as the San Antonio Express-News and WNBC in New York have done recent stories on Stockgate, NBC's Dateline continues to sit on a segment that has been in the works for well over a year. Their segment, which was originally scheduled to air in early 2004, has been postponed numerous times, and, according to our sources, is now scheduled to air "sometime before April 15th". I'll believe it when I see it. After the events of the past few weeks, the scandal might be well on its way to being resolved by the time Dateline finally gets their act together.

Congress To SEC: "Regulation SHO is Not Working"

While thousands of investors have joined advocates for stock market reform in speaking out publically, others have been quietly working behind the scenes to convince Congress to launch an investigation into the naked short selling scandal. We have been working with a number of people who have been busy lobbying members of Congress to take steps to end the rampant corruption that has plagued the market for years, and yesterday, those efforts finally began to pay off.

In a hearing in the US Senate Committee on Banking, Housing, and Urban Affairs, Senator Robert Bennett grilled SEC Chairman William Donaldson about the naked short selling scandal, citing the Global Links story and opening his statement by telling Donaldson "You put out a new rule in January to deal with naked short selling, and as nearly as I can tell from my constituents, who feel victimized by this - it's not working." He then went on to read from the Global Links article and said that "this article just last Friday in a national publication indicates that people are still selling short shares that they don't have and clearly are never gonna acquire."

When Donaldson tried to argue that "short selling is not illegal", Bennett interrupted him by saying "I approve of short selling, it's the naked short selling we're going after." Donaldson then tried to describe how the recently enacted Regulation SHO dealing with the naked short selling problem, and was again interrupted by Senator Bennett, whose final comment was "My main message here is that the evidence is Rule SHO is not working, so that's what we need to get into in detail." He concluded by directing Donaldson to present an "in depth briefing" to the committee.

What Now?

This is a major victory for those of us who have often felt as if we have been beating our heads against the wall in this crusade. Mark this day down on your calenders as the day that our voices were finally heard in the halls of Congress, but be aware that this is only the beginning, there is much work yet to be done. Now is the time to step up efforts to spread the word like never before, to contact Senator Bennett and all the members of the US Senate Committee on Banking, Housing, and Urban Affairs, the Senate Finance Committee, as well as your own Congressmen and Senators. Tell them that we demand justice. Remind them that President Bush wants to invest our Social Security money into a stock market where corruption is rampant. Tell them that a full Congressional investigation is the only solution to this national scandal, and continue to spread the word to the media and through the internet. Then, and only then, will our markets once again be safe for investors.

To contact members of the US Senate Committee on Banking, Housing, and Urban Affairs, go here and click on the members' names:
http://banking.senate.gov/index.cfm?Fuse...

To contact members of the Senate Finance Committee, go here and click on the members' names:
http://finance.senate.gov/sitepages/comm...

To listen to Senator Robert Bennett's testimony and SEC Chairman William Donaldson's response from the March 9th US Senate Committee on Banking, Housing, and Urban Affairs hearing, go here, click on "Video Archive" and fast forward to 1:19:30:

http://banking.senate.gov/index.cfm?Fuse...

                  Kirk  S&P500  NASDAQ  BRKA
2YR: 12/31/2002   +69%   +41%    +63%   +23%
4YR: 12/31/2000   +35%    -3%    -12%   +26%
6YR: 12/31/1998  +160%     7%     -1%   +27%