Post by cobalt on Jul 19, 2006 12:52:02 GMT -4
Don't know if this was already posted, if so, delete.
SAN FRANCISCO (MarketWatch) - Federal prosecutors and regulators have begun investigating possible overcharging for stock lending, a service that helps hedge funds and other traders sell short, The Wall Street Journal reported Tuesday.
The U.S. attorney for the Eastern District of New York in Brooklyn has begun investigating potential overcharging and the use of bogus "finder's fees," the newspaper said, citing people familiar with the case. The prosecutor's office is working with the Securities and Exchange Commission and the New York Stock Exchange, the newspaper added.
Robert Nardoza, a spokesman for the U.S. attorney in Brooklyn, declined to comment.
Brokers lend shares to hedge funds and other traders, who then sell the stock in the hope of buying it back at lower prices later. Prime brokers, which provide stock-lending services to hedge funds, can lend stock if they have reasonable grounds for believing it can be borrowed. But The Wall Street Journal reported that a recent lawsuit against the largest prime brokers alleged they sometimes charge fees for the service without ever borrowing the stock.
Van Der Moolen Holding NV (VDM : van der moolen hldg n.v. sponsored adr
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VDM6.43, +0.23, +3.7%) was fined $3.5 million by the NYSE on Monday after the specialist's stock loan department allegedly overcharged clients and paid fees to finders who performed no legitimate business function. See full story.
Short selling has come under increased scrutiny this year as companies, including Overstock.com (OSTK : overstock com inc del com
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Last: 19.28-0.23-1.18%
12:35pm 07/19/2006
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OSTK19.28, -0.23, -1.2%) and Biovail (BVF : biovail corp com
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Last: 21.87+0.38+1.77%
12:30pm 07/19/2006
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BVF21.87, +0.38, +1.8%) , have filed lawsuits claiming they're victims of wrongdoing by short sellers.
In June, the NYSE inquired about so-called naked short selling and whether the practice helped drive down Vonage shares (VG : vonage hldgs corp com
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Last: 7.12+0.15+2.15%
12:30pm 07/19/2006
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VG7.12, +0.15, +2.2%) after the Internet phone company's initial public offering. See full story.
Naked short selling occurs when a trader sells without first making necessary arrangements to borrow the shares. That means the seller often fails to deliver the stock to the buyer and the trade can't be settled, running afoul of securities laws. See full story.
Alistair Barr is a reporter for MarketWatch in San Francisco.
12:40PM 7/19/2006Bernanke keeps options open as economy's in flux
12:09PM 7/19/2006U.S. stock gains accelerate on Fed chief Bernanke's testimony
11:40AM 7/19/2006J.P. Morgan profit more than triples on investment banking
11:20AM 7/19/2006Shares retreat as Rambus to restate results
10:15AM 7/19/2006Yahoo shares down 19% on results, forecast
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SAN FRANCISCO (MarketWatch) - Federal prosecutors and regulators have begun investigating possible overcharging for stock lending, a service that helps hedge funds and other traders sell short, The Wall Street Journal reported Tuesday.
The U.S. attorney for the Eastern District of New York in Brooklyn has begun investigating potential overcharging and the use of bogus "finder's fees," the newspaper said, citing people familiar with the case. The prosecutor's office is working with the Securities and Exchange Commission and the New York Stock Exchange, the newspaper added.
Robert Nardoza, a spokesman for the U.S. attorney in Brooklyn, declined to comment.
Brokers lend shares to hedge funds and other traders, who then sell the stock in the hope of buying it back at lower prices later. Prime brokers, which provide stock-lending services to hedge funds, can lend stock if they have reasonable grounds for believing it can be borrowed. But The Wall Street Journal reported that a recent lawsuit against the largest prime brokers alleged they sometimes charge fees for the service without ever borrowing the stock.
Van Der Moolen Holding NV (VDM : van der moolen hldg n.v. sponsored adr
News , chart, profile, more
Last: 6.43+0.23+3.71%
12:02pm 07/19/2006
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
VDM6.43, +0.23, +3.7%) was fined $3.5 million by the NYSE on Monday after the specialist's stock loan department allegedly overcharged clients and paid fees to finders who performed no legitimate business function. See full story.
Short selling has come under increased scrutiny this year as companies, including Overstock.com (OSTK : overstock com inc del com
News , chart, profile, more
Last: 19.28-0.23-1.18%
12:35pm 07/19/2006
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
OSTK19.28, -0.23, -1.2%) and Biovail (BVF : biovail corp com
News , chart, profile, more
Last: 21.87+0.38+1.77%
12:30pm 07/19/2006
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
BVF21.87, +0.38, +1.8%) , have filed lawsuits claiming they're victims of wrongdoing by short sellers.
In June, the NYSE inquired about so-called naked short selling and whether the practice helped drive down Vonage shares (VG : vonage hldgs corp com
News , chart, profile, more
Last: 7.12+0.15+2.15%
12:30pm 07/19/2006
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
VG7.12, +0.15, +2.2%) after the Internet phone company's initial public offering. See full story.
Naked short selling occurs when a trader sells without first making necessary arrangements to borrow the shares. That means the seller often fails to deliver the stock to the buyer and the trade can't be settled, running afoul of securities laws. See full story.
Alistair Barr is a reporter for MarketWatch in San Francisco.
12:40PM 7/19/2006Bernanke keeps options open as economy's in flux
12:09PM 7/19/2006U.S. stock gains accelerate on Fed chief Bernanke's testimony
11:40AM 7/19/2006J.P. Morgan profit more than triples on investment banking
11:20AM 7/19/2006Shares retreat as Rambus to restate results
10:15AM 7/19/2006Yahoo shares down 19% on results, forecast
More newsE-mail | Print | Digg it | Del.icio.us | My Yahoo! | RSSSign up to receive the Weekend TV Show Preview e-Newsletter.
E-Mail Address: