Post by jannikki on Sept 19, 2007 23:38:06 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Canadians Regulators Resurrect Solutions to Settlement Abuses – September 11, 2007
David Patch
For many Americans we consider the US Capital Markets the most predominant markets in the World and consider our regulatory regime the most secure of all nations. Our perceptions would be different if we objectively looked outside the bubble we live in.
Australia and London have beefed up their capital market regulations and have done so with ingenuity instead of blind arrogance. They have come out to fight the battles of abuse instead of placating the financial stability of the members for whom they regulate.
These worldly markets have grown over time while the US capital markets have simply stagnated in an environment of conflicts of interest and chaos.
This week the Canadian regulators, long thought of as the bastard child to the US , proposed regulatory changes to short sale rules that could once again put the Securities and Exchange Commission at the back of the bus relative to the issues of settlement failure abuses. The Canadians had the luxury of watching gaffe after gaffe come from SEC’s attempts to promote safety and utilized the discarded options the SEC left at the corner trash barrel.
Consider that in 2005 the SEC released Regulation SHO to the markets to address the market abuses of long standing and potentially abusive settlement failures. The SEC was responding to the growing concerns of SRO’s, public issuers, and investors who were losing confidence in the safety of these markets due to the increasing levels of trade failures in our markets.
During the period of public comment for regulation SHO the NASD proposed to the SEC their own short sale rule changes that provided clear insight as to why failures persisted indefinitely.
In March of 2004 the NASD highlighted that settlement failures that persisted beyond 10 days past settlement date was an anomaly and must be treated differently. The NASD suggested that all fails of this age or greater must be reported to the Division of Market regulation and that the firm responsible for the fail must provide a daily report on why this trade remained in a failed status and why it could not be closed out.
More importantly, in that draft proposal the NASD stated “cost could not be a factor” when justifying a failed trade. This statement clearly aimed at member firms who were simply sitting on failed trades until such time as it was financially beneficial to close out that trade at the financial expense of the investor and issuer involved.
What happened to this language?
The SEC requested that the NASD pull back this proposal and await the release of their Federal level proposal. The SEC wanted to the NASD to sit back and wait for Regulation SHO.
Tem months later SHO became a federal rule and missing from that rule was any clear guidance on how to address persistent settlement failures. The NASD language and the NASD objective were lost in a myriad of subjective loopholes, and one grandfather clause.
This week such language was resurrected as a means of meeting the necessary and safe standards of settlement necessary for the protection of a capital market. The language was not resurrected in the US , it was being proposed as part of a short sale rule in Canada .
The Canadian markets, once known as a conduit for US Organized crime families to launder their proceeds through was now looking to crack down on settlement failure abuses by member firms and do so in a manner the SEC would not consider due to the potential costs to member firms.
I contacted SEC Media Relations spokesman John Heine about whether the SEC would be re-considering the language previously discarded based on the multiple failed attempts at locking this issue down. John had no comment outside of directing me to the SEC Rule proposals up for public comment for which, none address this particular issue with this particular language.
But as the Canadians took the good scraps left behind by the SEC they also took hold of some of the SEC’s failed attempts as well.
The Canadian proposal seeks to eliminate the “tick test” put in place to eliminate bear raids in a collapsing market. The proposal highlights that such a request is in response to the SEC’s removal of this protective tool earlier this summer and utilized a poorly conducted pilot program the SEC used as justification for the change.
Let’s just hope the Canadian markets are not witness to the same market volatility the US markets undertook immediately after the rule change was implemented.
Likewise the Canadian proposal does not seek to eliminate naked short sales as the SEC has elected to do. Naked short sales through Canada have long been a problem in the US markets with Phil Gurian and other reputed crime family members using this venue to launder money into the US . Naked short sales through Canada were also the venue used by convicted felon Anthony Elgindy.
The regulators have addressed some of the abuses that could come through naked short selling by imposing some regulatory responses to potential abuses. Unlike the SEC, the Canadian regulators have presented rules that would allow them to impose a moratorium on short sales in companies they feel may be abused by naked short sales and rules that would allow them to cancel trades on short sales executed where settlement failures persisted beyond 10 settlement days after the settlement date.
While these policies would require higher supervisory levels they do offer the opportunity to bring conclusions to abusive trades instead of relying on the SEC’s honor system for the crooks and criminals.
The Canadian Regulators have thrown down the gauntlet once discarded by the SEC. Will the SEC’s Division of Market Regulation have the integrity to look back on these past 2+ years of failed attempts and consider a venue once proposed by the NASD and presently proposed by the Canadian Regulators? The ‘not invented here attitude’ is old school and the SEC Division of Market Regulation needs to drop the arrogant attitude and listen to the solutions presented by others to a global problem recognized around the world.
How serious are the Canadian regulators at addressing this problem? Consider that Canadian regulators were the first to bring an enforcement case against a member firm for violating regulation SHO rules. To date the NYSE and NASD have brought additional cases forward but the SEC has yet to take a regulatory action for SHO violations. What they are waiting for we would all like to know.
I would offer that those who are interested in commenting on the new Canadian proposal should do so as defined on the Market Regulation Services Inc. website located at www.regulationservices.com. Look for Market integrity Notice MIN 2007-017. The proposal, as presented, has it points and its flaws and we owe it to the MRS to identify each appropriately.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007
An online newspaper reporting the issues of Securities Fraud
Canadians Regulators Resurrect Solutions to Settlement Abuses – September 11, 2007
David Patch
For many Americans we consider the US Capital Markets the most predominant markets in the World and consider our regulatory regime the most secure of all nations. Our perceptions would be different if we objectively looked outside the bubble we live in.
Australia and London have beefed up their capital market regulations and have done so with ingenuity instead of blind arrogance. They have come out to fight the battles of abuse instead of placating the financial stability of the members for whom they regulate.
These worldly markets have grown over time while the US capital markets have simply stagnated in an environment of conflicts of interest and chaos.
This week the Canadian regulators, long thought of as the bastard child to the US , proposed regulatory changes to short sale rules that could once again put the Securities and Exchange Commission at the back of the bus relative to the issues of settlement failure abuses. The Canadians had the luxury of watching gaffe after gaffe come from SEC’s attempts to promote safety and utilized the discarded options the SEC left at the corner trash barrel.
Consider that in 2005 the SEC released Regulation SHO to the markets to address the market abuses of long standing and potentially abusive settlement failures. The SEC was responding to the growing concerns of SRO’s, public issuers, and investors who were losing confidence in the safety of these markets due to the increasing levels of trade failures in our markets.
During the period of public comment for regulation SHO the NASD proposed to the SEC their own short sale rule changes that provided clear insight as to why failures persisted indefinitely.
In March of 2004 the NASD highlighted that settlement failures that persisted beyond 10 days past settlement date was an anomaly and must be treated differently. The NASD suggested that all fails of this age or greater must be reported to the Division of Market regulation and that the firm responsible for the fail must provide a daily report on why this trade remained in a failed status and why it could not be closed out.
More importantly, in that draft proposal the NASD stated “cost could not be a factor” when justifying a failed trade. This statement clearly aimed at member firms who were simply sitting on failed trades until such time as it was financially beneficial to close out that trade at the financial expense of the investor and issuer involved.
What happened to this language?
The SEC requested that the NASD pull back this proposal and await the release of their Federal level proposal. The SEC wanted to the NASD to sit back and wait for Regulation SHO.
Tem months later SHO became a federal rule and missing from that rule was any clear guidance on how to address persistent settlement failures. The NASD language and the NASD objective were lost in a myriad of subjective loopholes, and one grandfather clause.
This week such language was resurrected as a means of meeting the necessary and safe standards of settlement necessary for the protection of a capital market. The language was not resurrected in the US , it was being proposed as part of a short sale rule in Canada .
The Canadian markets, once known as a conduit for US Organized crime families to launder their proceeds through was now looking to crack down on settlement failure abuses by member firms and do so in a manner the SEC would not consider due to the potential costs to member firms.
I contacted SEC Media Relations spokesman John Heine about whether the SEC would be re-considering the language previously discarded based on the multiple failed attempts at locking this issue down. John had no comment outside of directing me to the SEC Rule proposals up for public comment for which, none address this particular issue with this particular language.
But as the Canadians took the good scraps left behind by the SEC they also took hold of some of the SEC’s failed attempts as well.
The Canadian proposal seeks to eliminate the “tick test” put in place to eliminate bear raids in a collapsing market. The proposal highlights that such a request is in response to the SEC’s removal of this protective tool earlier this summer and utilized a poorly conducted pilot program the SEC used as justification for the change.
Let’s just hope the Canadian markets are not witness to the same market volatility the US markets undertook immediately after the rule change was implemented.
Likewise the Canadian proposal does not seek to eliminate naked short sales as the SEC has elected to do. Naked short sales through Canada have long been a problem in the US markets with Phil Gurian and other reputed crime family members using this venue to launder money into the US . Naked short sales through Canada were also the venue used by convicted felon Anthony Elgindy.
The regulators have addressed some of the abuses that could come through naked short selling by imposing some regulatory responses to potential abuses. Unlike the SEC, the Canadian regulators have presented rules that would allow them to impose a moratorium on short sales in companies they feel may be abused by naked short sales and rules that would allow them to cancel trades on short sales executed where settlement failures persisted beyond 10 settlement days after the settlement date.
While these policies would require higher supervisory levels they do offer the opportunity to bring conclusions to abusive trades instead of relying on the SEC’s honor system for the crooks and criminals.
The Canadian Regulators have thrown down the gauntlet once discarded by the SEC. Will the SEC’s Division of Market Regulation have the integrity to look back on these past 2+ years of failed attempts and consider a venue once proposed by the NASD and presently proposed by the Canadian Regulators? The ‘not invented here attitude’ is old school and the SEC Division of Market Regulation needs to drop the arrogant attitude and listen to the solutions presented by others to a global problem recognized around the world.
How serious are the Canadian regulators at addressing this problem? Consider that Canadian regulators were the first to bring an enforcement case against a member firm for violating regulation SHO rules. To date the NYSE and NASD have brought additional cases forward but the SEC has yet to take a regulatory action for SHO violations. What they are waiting for we would all like to know.
I would offer that those who are interested in commenting on the new Canadian proposal should do so as defined on the Market Regulation Services Inc. website located at www.regulationservices.com. Look for Market integrity Notice MIN 2007-017. The proposal, as presented, has it points and its flaws and we owe it to the MRS to identify each appropriately.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007