Post by jannikki on Nov 12, 2005 10:46:58 GMT -4
SEC’s Blue Plate Special: Tax Free Fraud to Preferred Customers – June 28, 2005
David Patch
Ever wonder how to make money and never pay taxes on the income? Don’t we all dream of that day when we can keep all that we earned instead of watching it sift through our hands and into the hands of DC Politicians. There is a way. All you have to be is wealthy.
In a Wall Street Blue Plate Special served up by the Securities and Exchange Commission those fortunate enough to qualify can earn tax free income at the expense of --- yup you got it, those less fortunate. The tax-free income comes by way of preferential shorting.
The way trade revenues are reported to the IRS a trade has to contain both a buy execution and a sell execution. Once both obligations are fulfilled, the broker automatically reports the result of the closed trade as income [or loss] to the Internal Revenue Service. Investors in turn report these transactions on their personal Tax Returns or run the risk of getting a nasty government sponsored audit.
Now let’s take this process of taxable income reporting and leap forward to situations that are cropping up at an alarming rate. The SEC sponsored revocation of registrations of publicly traded securities. Those recently dusted off Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 guidelines that were closeted until issuers started lobbying the SEC to address abusive shorting that resulted in massive quantities of unsettled trades [naked shorting].
Since March 2004 the SEC has ramped up their efforts to revoke the registrations of companies who fail to meet timely filings. The SEC has a choice of either suspending registrations of these companies for up to a year or, completely and permanently revoking the registration. In all cases the SEC Administrative Judges voted for permanent revocation – near 100 cases in a little over a year. Why the harshness when innocent investors lose everything when a stock no longer trades?
Here is that SEC Blue Plate Special - The unsettled trades in our markets.
When a company stops trading, any and all unsettled trades, and open short positions are erased. They no longer exist for closeout. Without closure they become tax-free income to the seller of those shares that never settled. By Wall Street policies, and IRS guidelines, if a trade does not have a buy execution and a sell execution there is no defined profit or loss to calculate. The investor can claim the profits as a good citizen but no broker report to the IRS or client will force them to.
Let’s use a simple example to illustrate:
Company XYZ has 100 Million Registered Shares – Trade Price $1.00/share
Hedge Fund 1, 2, and 3 all decide to short the stock creating an additional 100 Million shares. In the companies whose registrations are revoked there are no shares to borrow so these would go as unsettled trades. The SEC also admits that the number of settlement fails can exceed the public float (Ref: Regulation SHO proposal).
In the short selling raid the stock price drops to $.01 due to heavy sell side volume in the stock. The weighted average short price over 100 million shares is $.50.
The Company can’t raise operating capital due to the price of $.01 so they fail to make proper SEC filings. Sarbanes-Oxley just ramped up those costs.
SEC Initiates Administrative order to revoke registration. Shares in Circulation = 200 Million [100 Million issued by the Company, 100 Million created by Hedge Funds].
All 200 million shareholders sell their shares to their broker for the nominal fee of $1.00 and declare a total tax loss on their investment. 200 Million X $.50 avg/share = $100 Million tax liability.
Hedge Fund 1, 2, and 3 receive all margins they may have put up on the short positions when the stock stops trading. The result, they pocket 100 Million Shares X $.50 avg/share = $50 Million. Since the Hedge Funds never closed out the short, the broker never declares this a taxable trade to the IRS.
Total Tax Liability to US Economy $100 Million in tax write-offs and $50 Million in undeclared income.
The Securities and Exchange Commission Blue Plate Special dedicated to those who have the power and wealth to sell what they do not own. This special helps manipulate our markets and then let the manipulators walk away with tax free ill-gotten gains. Order up a serving for yourself today.
So how do we know this is real?
If you recall, in January 2005 the SEC’s Regulation SHO came into affect. On January 7, 2005 the first threshold security lists were posted containing names of companies with settlement failures that exceeded 10,000 shares and 0.5% of their recorded shares outstanding. The list was being calculated using the Depository Trust Clearing Corporations continuous net settlement [CNS] records of fails per issuer.
The regulators blinked.
The first few posted threshold lists contained companies that not only were not reporting but companies the SEC was going after for revocation of registration for not reporting. Companies the SEC ultimately shut down. While it may have been impossible to calculate whether or not the fails exceeded the 0.5% of the shares outstanding, due to a lack of filing a share structure with the SEC, the CNS settlement data highlighted fails on their books for these issuers. Fails that exceeded 0.5% of the last reported share structure.
Do you think the SEC sought out those illegal and open short positions to force settlement prior to their action to shut the company down? Do you think the SEC notified the IRS about the unreported trades that resulted from their actions? Not a chance! The SEC was too busy shutting these companies down with malice in order to protect these illegal trades and as they will tell you, the SEC has nothing to do with collecting taxes.
Some of the companies listed on the Regulation SHO list in early 2005 that have subsequently had their registrations revoked by the SEC are Gadzooks, Infotopia, and Dr. Koop.com. There are others as well.
Today, the NASDAQ’s threshold security list even continues to display one company that has not traded in a year, GenesisIntermedia (GENI). GENI being involved in one of the worst collapses of a Wall Street Clearing firm in the history of Wall Street, Minnesota based MJK Clearing. The cause of the collapse, the massive over-loaning of shares in GenesisIntermedia in a fraud orchestrated by company insiders and a former Iran-Contra Arms dealer named Adnan Khashoggi. Excessive loaning of shares to cover a failed trade is part of the root issue to shorting abuses. The same share can be loaned out to several different people diluting the stock while settlement failures accrue.
How does the SEC plan to get GENI off the Regulation SHO threshold list if they [SEC] has grandfathered the fails from mandatory closeout and the stock has stopped trading? The owners of those fails certainly have no intention of trying to find a seller to buy in the fail when they stock doesn’t trade. Instead the SEC will most notably take action to revoke the registration of the company. The SEC will claim that it is protecting the investors in doing so and that the fails are irrelevant to the picture. Irrelevant because somebody bought a share years ago that never existed in the first place. Where is that clients Broker?
I guess the bottom line here is if you want to participate in the Government sponsored Blue Plate Special of tax-free income all you have to do is become wealthy enough to invest in Hedge Funds. I wonder what they serve these Funds for desert. For those unqualified to meet the standards of this special Hedge Fund investing, we will simply carry the tax burdens of those privileged individuals.
The DTCC today carries a liability of reportedly $6 Billion daily in unsettled trades. How much will become tax-free income? That seems to be partly up to the Securities and Exchange Commission and their most recent attacks on small investors.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
David Patch
Ever wonder how to make money and never pay taxes on the income? Don’t we all dream of that day when we can keep all that we earned instead of watching it sift through our hands and into the hands of DC Politicians. There is a way. All you have to be is wealthy.
In a Wall Street Blue Plate Special served up by the Securities and Exchange Commission those fortunate enough to qualify can earn tax free income at the expense of --- yup you got it, those less fortunate. The tax-free income comes by way of preferential shorting.
The way trade revenues are reported to the IRS a trade has to contain both a buy execution and a sell execution. Once both obligations are fulfilled, the broker automatically reports the result of the closed trade as income [or loss] to the Internal Revenue Service. Investors in turn report these transactions on their personal Tax Returns or run the risk of getting a nasty government sponsored audit.
Now let’s take this process of taxable income reporting and leap forward to situations that are cropping up at an alarming rate. The SEC sponsored revocation of registrations of publicly traded securities. Those recently dusted off Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 guidelines that were closeted until issuers started lobbying the SEC to address abusive shorting that resulted in massive quantities of unsettled trades [naked shorting].
Since March 2004 the SEC has ramped up their efforts to revoke the registrations of companies who fail to meet timely filings. The SEC has a choice of either suspending registrations of these companies for up to a year or, completely and permanently revoking the registration. In all cases the SEC Administrative Judges voted for permanent revocation – near 100 cases in a little over a year. Why the harshness when innocent investors lose everything when a stock no longer trades?
Here is that SEC Blue Plate Special - The unsettled trades in our markets.
When a company stops trading, any and all unsettled trades, and open short positions are erased. They no longer exist for closeout. Without closure they become tax-free income to the seller of those shares that never settled. By Wall Street policies, and IRS guidelines, if a trade does not have a buy execution and a sell execution there is no defined profit or loss to calculate. The investor can claim the profits as a good citizen but no broker report to the IRS or client will force them to.
Let’s use a simple example to illustrate:
Company XYZ has 100 Million Registered Shares – Trade Price $1.00/share
Hedge Fund 1, 2, and 3 all decide to short the stock creating an additional 100 Million shares. In the companies whose registrations are revoked there are no shares to borrow so these would go as unsettled trades. The SEC also admits that the number of settlement fails can exceed the public float (Ref: Regulation SHO proposal).
In the short selling raid the stock price drops to $.01 due to heavy sell side volume in the stock. The weighted average short price over 100 million shares is $.50.
The Company can’t raise operating capital due to the price of $.01 so they fail to make proper SEC filings. Sarbanes-Oxley just ramped up those costs.
SEC Initiates Administrative order to revoke registration. Shares in Circulation = 200 Million [100 Million issued by the Company, 100 Million created by Hedge Funds].
All 200 million shareholders sell their shares to their broker for the nominal fee of $1.00 and declare a total tax loss on their investment. 200 Million X $.50 avg/share = $100 Million tax liability.
Hedge Fund 1, 2, and 3 receive all margins they may have put up on the short positions when the stock stops trading. The result, they pocket 100 Million Shares X $.50 avg/share = $50 Million. Since the Hedge Funds never closed out the short, the broker never declares this a taxable trade to the IRS.
Total Tax Liability to US Economy $100 Million in tax write-offs and $50 Million in undeclared income.
The Securities and Exchange Commission Blue Plate Special dedicated to those who have the power and wealth to sell what they do not own. This special helps manipulate our markets and then let the manipulators walk away with tax free ill-gotten gains. Order up a serving for yourself today.
So how do we know this is real?
If you recall, in January 2005 the SEC’s Regulation SHO came into affect. On January 7, 2005 the first threshold security lists were posted containing names of companies with settlement failures that exceeded 10,000 shares and 0.5% of their recorded shares outstanding. The list was being calculated using the Depository Trust Clearing Corporations continuous net settlement [CNS] records of fails per issuer.
The regulators blinked.
The first few posted threshold lists contained companies that not only were not reporting but companies the SEC was going after for revocation of registration for not reporting. Companies the SEC ultimately shut down. While it may have been impossible to calculate whether or not the fails exceeded the 0.5% of the shares outstanding, due to a lack of filing a share structure with the SEC, the CNS settlement data highlighted fails on their books for these issuers. Fails that exceeded 0.5% of the last reported share structure.
Do you think the SEC sought out those illegal and open short positions to force settlement prior to their action to shut the company down? Do you think the SEC notified the IRS about the unreported trades that resulted from their actions? Not a chance! The SEC was too busy shutting these companies down with malice in order to protect these illegal trades and as they will tell you, the SEC has nothing to do with collecting taxes.
Some of the companies listed on the Regulation SHO list in early 2005 that have subsequently had their registrations revoked by the SEC are Gadzooks, Infotopia, and Dr. Koop.com. There are others as well.
Today, the NASDAQ’s threshold security list even continues to display one company that has not traded in a year, GenesisIntermedia (GENI). GENI being involved in one of the worst collapses of a Wall Street Clearing firm in the history of Wall Street, Minnesota based MJK Clearing. The cause of the collapse, the massive over-loaning of shares in GenesisIntermedia in a fraud orchestrated by company insiders and a former Iran-Contra Arms dealer named Adnan Khashoggi. Excessive loaning of shares to cover a failed trade is part of the root issue to shorting abuses. The same share can be loaned out to several different people diluting the stock while settlement failures accrue.
How does the SEC plan to get GENI off the Regulation SHO threshold list if they [SEC] has grandfathered the fails from mandatory closeout and the stock has stopped trading? The owners of those fails certainly have no intention of trying to find a seller to buy in the fail when they stock doesn’t trade. Instead the SEC will most notably take action to revoke the registration of the company. The SEC will claim that it is protecting the investors in doing so and that the fails are irrelevant to the picture. Irrelevant because somebody bought a share years ago that never existed in the first place. Where is that clients Broker?
I guess the bottom line here is if you want to participate in the Government sponsored Blue Plate Special of tax-free income all you have to do is become wealthy enough to invest in Hedge Funds. I wonder what they serve these Funds for desert. For those unqualified to meet the standards of this special Hedge Fund investing, we will simply carry the tax burdens of those privileged individuals.
The DTCC today carries a liability of reportedly $6 Billion daily in unsettled trades. How much will become tax-free income? That seems to be partly up to the Securities and Exchange Commission and their most recent attacks on small investors.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005