Post by jannikki on Nov 12, 2005 10:15:57 GMT -4
Bring in the Secret Service – November 2, 2004
Dave Patch
The Securities Industry, along with the participation of the Securities Regulators has declared it legal to sell securities you do not own. They do so for the revenues associated with the liquidity of these non-existent shares. The question is, is the SEC allowing Wall Street to violate the US Criminal Code Title 18, Chapter 25, and Section 514?
In a letter dated December 22, 2003 SEC Asst. Director of Market Regulation James Brigagliano stated, Naked shorting “generally refers to a sale of securities when the seller does not own the securities sold and makes no arrangements to borrow the securities in order to make delivery on the sale. The buyer will, however, receive a book-entry position at his broker-dealer, and is thus able to re-sell the securities.”
My interpretation of this is quite simple. Person A sells to person B a security they do not own. The broker, in turn creates a fake share in Person B’s account so that Person B is given the false impression of ownership. Person B then, seeing the share in the account, can turn around at a later date and sell that share even though Person B actually never owned and held possession of anything. This is the Sec’s definition of a fair market.
Now let’s turn to the US Criminal code on Counterfeiting:
TITLE 18--CRIMES AND CRIMINAL PROCEDURE
PART I--CRIMES
CHAPTER 25--COUNTERFEITING AND FORGERY
Sec. 514. Fictitious obligations
(a) Whoever, with the intent to defraud—
(1) draws, prints, processes, produces, publishes, or otherwise makes, or attempts or causes the same, within the United States;
(2) passes, utters, presents, offers, brokers, issues, sells, or attempts or causes the same, or with like intent possesses, within the United States; or
(3) utilizes interstate or foreign commerce, including the use of the mails or wire, radio, or other electronic communication, to transmit, transport, ship, move,
transfer, or attempts or causes the same, to, from, or through the United States,any false or fictitious instrument, document, or other item appearing, representing,
purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign
government, a State or other political subdivision of the United States, or an organization, shall be guilty of a class B felony.
(b) For purposes of this section, any term used in this section that is defined in section 513(c) has the same meaning given such term in section 513(c).
(c) The United States Secret Service, in addition to any other agency having such authority, shall have authority to investigate offenses under this section.
This is clearly a conflict between the SEC’s willingness to allow settlement failures for the sanctity of liquidity and the creation of counterfeit and
forged securities.
Person B, the buyer of said security, has entrusted their broker to go out and purchase a security. Instead, the broker failed in the enforcement
of delivery of said security and thus created a false and fictitious share in the account of Person B for the purposes of appearance. It was done
so for financial gain. That same broker will, at a later date, allow Person B to continue to distribute this same false security to the next
uninformed party as Person B sells this fictitious share to third party Person C. Hence, the distribution of counterfeit shares begins.
Section 17a of the Securities Act of 1934 demands that all equity trades be settled promptly for the safety of the Industry and the Markets. The
SEC, in a memo to Senator Sarbanes dated September 15, 2004 stated that there would be mandatory close-out of all short sales above the
threshold limit in securities oversold with settlement failures. The SEC, in the letter, neglected to define a timeline for mandatory and has
blocked the NASD proposal that would define mandatory as a maximum of 10 business days.
Has the SEC been aiding in the creation of counterfeit shares? Is the latest regulation release by the SEC in violation of the US Criminal code
pertaining to counterfeiting? If naked shorting, and the settlement failures identified by the SEC as being associated naked shorting is abusive
and manipulative, why does the SEC ignore this US Criminal code and allow the counterfeiting to continue?
In prior reports I have presented the misleading and error laden statements of the SEC in a response letter to Senator Sarbanes regarding
naked shorting. Taking the context of those statements, and the clear language of this Criminal Code, who is it the SEC is trying to protect in
this matter? Are the Investors getting the short end of the stick in SEC protection?
These are answers many investors and issuers want the SEC to come clean on. Why would the SEC allow such an injustice to continue? Who
are they protecting and is it worth it to do so at a potential violation of US Criminal Code?
Dave Patch
The Securities Industry, along with the participation of the Securities Regulators has declared it legal to sell securities you do not own. They do so for the revenues associated with the liquidity of these non-existent shares. The question is, is the SEC allowing Wall Street to violate the US Criminal Code Title 18, Chapter 25, and Section 514?
In a letter dated December 22, 2003 SEC Asst. Director of Market Regulation James Brigagliano stated, Naked shorting “generally refers to a sale of securities when the seller does not own the securities sold and makes no arrangements to borrow the securities in order to make delivery on the sale. The buyer will, however, receive a book-entry position at his broker-dealer, and is thus able to re-sell the securities.”
My interpretation of this is quite simple. Person A sells to person B a security they do not own. The broker, in turn creates a fake share in Person B’s account so that Person B is given the false impression of ownership. Person B then, seeing the share in the account, can turn around at a later date and sell that share even though Person B actually never owned and held possession of anything. This is the Sec’s definition of a fair market.
Now let’s turn to the US Criminal code on Counterfeiting:
TITLE 18--CRIMES AND CRIMINAL PROCEDURE
PART I--CRIMES
CHAPTER 25--COUNTERFEITING AND FORGERY
Sec. 514. Fictitious obligations
(a) Whoever, with the intent to defraud—
(1) draws, prints, processes, produces, publishes, or otherwise makes, or attempts or causes the same, within the United States;
(2) passes, utters, presents, offers, brokers, issues, sells, or attempts or causes the same, or with like intent possesses, within the United States; or
(3) utilizes interstate or foreign commerce, including the use of the mails or wire, radio, or other electronic communication, to transmit, transport, ship, move,
transfer, or attempts or causes the same, to, from, or through the United States,any false or fictitious instrument, document, or other item appearing, representing,
purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign
government, a State or other political subdivision of the United States, or an organization, shall be guilty of a class B felony.
(b) For purposes of this section, any term used in this section that is defined in section 513(c) has the same meaning given such term in section 513(c).
(c) The United States Secret Service, in addition to any other agency having such authority, shall have authority to investigate offenses under this section.
This is clearly a conflict between the SEC’s willingness to allow settlement failures for the sanctity of liquidity and the creation of counterfeit and
forged securities.
Person B, the buyer of said security, has entrusted their broker to go out and purchase a security. Instead, the broker failed in the enforcement
of delivery of said security and thus created a false and fictitious share in the account of Person B for the purposes of appearance. It was done
so for financial gain. That same broker will, at a later date, allow Person B to continue to distribute this same false security to the next
uninformed party as Person B sells this fictitious share to third party Person C. Hence, the distribution of counterfeit shares begins.
Section 17a of the Securities Act of 1934 demands that all equity trades be settled promptly for the safety of the Industry and the Markets. The
SEC, in a memo to Senator Sarbanes dated September 15, 2004 stated that there would be mandatory close-out of all short sales above the
threshold limit in securities oversold with settlement failures. The SEC, in the letter, neglected to define a timeline for mandatory and has
blocked the NASD proposal that would define mandatory as a maximum of 10 business days.
Has the SEC been aiding in the creation of counterfeit shares? Is the latest regulation release by the SEC in violation of the US Criminal code
pertaining to counterfeiting? If naked shorting, and the settlement failures identified by the SEC as being associated naked shorting is abusive
and manipulative, why does the SEC ignore this US Criminal code and allow the counterfeiting to continue?
In prior reports I have presented the misleading and error laden statements of the SEC in a response letter to Senator Sarbanes regarding
naked shorting. Taking the context of those statements, and the clear language of this Criminal Code, who is it the SEC is trying to protect in
this matter? Are the Investors getting the short end of the stick in SEC protection?
These are answers many investors and issuers want the SEC to come clean on. Why would the SEC allow such an injustice to continue? Who
are they protecting and is it worth it to do so at a potential violation of US Criminal Code?