Post by jannikki on Nov 12, 2005 10:54:54 GMT -4
More Evidence of Stock Counterfeiting has surfaced – November 1, 2005
David Patch
So the Securities and Exchange Commission is out to protect Investors. Counterfeiting does not take place in our Markets. The liability of unsettled trades is a burden to the Institutions. Boy does this sound refreshing. But are the statements really true?
On October 28, 2005 an Administrative Judge at the Securities and Exchange Commission ruled that St. George Metals was in violation of Exchange Act Rules 13a-1 and 13a-13 by failing to file annual reports on Form 10-K or 10KSB over the past few years. The result of this ruling was that St. George Metals (SGGM) would have their registration revoked effective immediately making them no longer tradable as a public entity.
For the past year plus the SEC has initiated a concerted effort to revoke registrations of such violators after multiple years of hiatus from the process. While I cannot refute the rationalization behind the efforts of the SEC I wonder about the timeliness of this stepped up effort.
St. George Metals’ shareholders have contended that their stock has been artificially depressed due to the process of naked shorting abuses. To this day, it is unclear as to whether their allegations were substantiated or used as an excuse. But what we do know is that St. George Metals appears on the naked shorting scarlet letter list. The ‘scarlet letter list’ being the Regulation SHO threshold security list published daily by the major markets. In fact St. George Metals has been listed for 47 consecutive trade days, better than 2 Calendar months, as presented by the NASDAQ.
To understand what the threshold security list is would be complicated. The simple explanation is that a number greater than 10,000 shares and greater than 0.5% of the total shares issued and outstanding are presently booked as a settlement failure in the system. In layman’s terms, a minimum quantity of shares were sold by a seller but never delivered to a buyer of said securities.
By the order of the Administration, St. George Metals can no longer trade publicly therefore no future trading to settle out fails in the system can take place. So what about these excessive fails that has held St. George Metals on the threshold list?
Let’s start with investor protection.
To date the SEC has claimed that the unsettled trades that exist in the marketplace are not injurious to investors. Any investor can sell their stock even if their particular broker-dealer never settled the trade. Don’t unsettled trades create an excess of shareholders? If every legitimate share is owned by an investor, and somebody sells something that doesn’t exist, did we not just create additional victims?
To use fictitious numbers to prove a point, let’s assume SGGM had 100 Million shares outstanding and the very minimum 0.5% shares went unsettled; 500,000 shares. Investors have paid for these excessive 500,000 shares yet; they do not own any real stock in the company as the trade never settled. The trade can’t settle because those additional 500,000 shares are not registered shares issued by the company. Without settlement, you have no rights associated with ownership.
At a bare minimum, the number of shares in circulation as represented would be 100.5 Million or more than the rightful number of owners of this now private [non-public] company.
The financial liability for these excess shares has been touted by the SEC, and specifically the Division of Market Regulation, as a liability carried by the executing broker-dealers who entered the trade without settlement. Any costs required to close out the transaction, if a premium had to be paid, would be done at the expense of the broker-dealer. But that liability has never become a forced burden by the regulatory bodies. The SEC and sub-tier SRO’s have never forced the industry to pony up and settle out their liabilities; regardless of a law that requires them to do so.
Under the example stated above, real investors purchased those additional 500,000 shares. They did so with capital they worked to acquire through hard work. If the stocks were purchased at $1.00/share that would be $500,000 worth of hard earned capital spent by individual investors to purchase rights in a company. If the Investors paid out $500,000 for stock ownership, and stock ownership was never delivered, who then received the money? When a stock never settles, somebody gets to take claim for the transfer of funds associated with that $500,000 for 500,000 shares. The money left the accounts and had to go somewhere.
Fact is the $500,000 is distributed to the short seller which may or may not be the Institution itself. When the stock stops trading, no individual shareholder knows specifically whether they own the 100 Million real shares or the 500,000 fake ones not yet settled. The presumption is everybody loses. Those that received the money from the sale of unregistered securities walk away from all financial obligations and liabilities. Novels gig if you can get it.
This thus brings up the last question. What constitutes counterfeit?
To counterfeit a stock, the seller must have intent on passing something off as authentic to deceive.
At present the securities regulators have parsed meanings based on eventual settlement. The initial sale was done with intent to deceive but instead of a counterfeit share, an extended and unidentified IOU is provided therefore the stock sale was not counterfeit. With the IOU the SEC claims it is not counterfeit, it is a loan.
However, in the case of St. George Metals and other similar companies, the sale of a counterfeit security was in fact executed since the IOU can not be closed out. With the SEC pulling the registration of the security, thus restricting any future trading of the stock in the open market, the seller can never acquire the ultimate legitimized share to make good on delivery. The initial unsettled trade became a ruse. A high stakes pyramid scheme using counterfeit shares to deceive investors into buying what otherwise does not exist. A scheme orchestrated by Wall Street and supervised by Federal regulators. The unsettled trade became the sale of a counterfeit security.
Before people dismiss this argument because St. George Metals violated Securities Laws by not filing as required remember, two wrongs do not make a right. The SEC has no right to selectively decide who they will protect and who they won’t. Shareholders of St. George Metals had a right by law to receive what they purchased with real capital. By not forcing those who executed trades without intent on settlement violated several other securities laws and thus used this means to injure all shareholders of St. George Metals. For all we know it was the sale of excessive counterfeit shares that injured the business model SGGM had to achieve success.
Those questions will never be answered as the SEC refuses to aid corporations in understanding who their rightful shareholders are and how their stock trades in the open market. Those are secrets the SEC and industry institutions keep near and dear to their collective dark souls.
So how does the SEC explain away the counterfeit shares they themselves have proved existed? They won’t. The Commission is riddled in conflicted opinions and ignorance. Many within the Commission would willingly destroy every small investor and company so long as the Wall Street machine grows and prospers to finance our Nations wealthiest. Along with this destruction of the small investor and companies goes our nation’s economy and integrity.
St. George Metals is not simply an isolated event; the fraud of unsettled trades is an industry standard representative of years of abuse. The loss to investors over this abuse is near $1 Trillion and growing. Don’t shot the messenger, understand the symptom. St. George Metals is just another messenger.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
David Patch
So the Securities and Exchange Commission is out to protect Investors. Counterfeiting does not take place in our Markets. The liability of unsettled trades is a burden to the Institutions. Boy does this sound refreshing. But are the statements really true?
On October 28, 2005 an Administrative Judge at the Securities and Exchange Commission ruled that St. George Metals was in violation of Exchange Act Rules 13a-1 and 13a-13 by failing to file annual reports on Form 10-K or 10KSB over the past few years. The result of this ruling was that St. George Metals (SGGM) would have their registration revoked effective immediately making them no longer tradable as a public entity.
For the past year plus the SEC has initiated a concerted effort to revoke registrations of such violators after multiple years of hiatus from the process. While I cannot refute the rationalization behind the efforts of the SEC I wonder about the timeliness of this stepped up effort.
St. George Metals’ shareholders have contended that their stock has been artificially depressed due to the process of naked shorting abuses. To this day, it is unclear as to whether their allegations were substantiated or used as an excuse. But what we do know is that St. George Metals appears on the naked shorting scarlet letter list. The ‘scarlet letter list’ being the Regulation SHO threshold security list published daily by the major markets. In fact St. George Metals has been listed for 47 consecutive trade days, better than 2 Calendar months, as presented by the NASDAQ.
To understand what the threshold security list is would be complicated. The simple explanation is that a number greater than 10,000 shares and greater than 0.5% of the total shares issued and outstanding are presently booked as a settlement failure in the system. In layman’s terms, a minimum quantity of shares were sold by a seller but never delivered to a buyer of said securities.
By the order of the Administration, St. George Metals can no longer trade publicly therefore no future trading to settle out fails in the system can take place. So what about these excessive fails that has held St. George Metals on the threshold list?
Let’s start with investor protection.
To date the SEC has claimed that the unsettled trades that exist in the marketplace are not injurious to investors. Any investor can sell their stock even if their particular broker-dealer never settled the trade. Don’t unsettled trades create an excess of shareholders? If every legitimate share is owned by an investor, and somebody sells something that doesn’t exist, did we not just create additional victims?
To use fictitious numbers to prove a point, let’s assume SGGM had 100 Million shares outstanding and the very minimum 0.5% shares went unsettled; 500,000 shares. Investors have paid for these excessive 500,000 shares yet; they do not own any real stock in the company as the trade never settled. The trade can’t settle because those additional 500,000 shares are not registered shares issued by the company. Without settlement, you have no rights associated with ownership.
At a bare minimum, the number of shares in circulation as represented would be 100.5 Million or more than the rightful number of owners of this now private [non-public] company.
The financial liability for these excess shares has been touted by the SEC, and specifically the Division of Market Regulation, as a liability carried by the executing broker-dealers who entered the trade without settlement. Any costs required to close out the transaction, if a premium had to be paid, would be done at the expense of the broker-dealer. But that liability has never become a forced burden by the regulatory bodies. The SEC and sub-tier SRO’s have never forced the industry to pony up and settle out their liabilities; regardless of a law that requires them to do so.
Under the example stated above, real investors purchased those additional 500,000 shares. They did so with capital they worked to acquire through hard work. If the stocks were purchased at $1.00/share that would be $500,000 worth of hard earned capital spent by individual investors to purchase rights in a company. If the Investors paid out $500,000 for stock ownership, and stock ownership was never delivered, who then received the money? When a stock never settles, somebody gets to take claim for the transfer of funds associated with that $500,000 for 500,000 shares. The money left the accounts and had to go somewhere.
Fact is the $500,000 is distributed to the short seller which may or may not be the Institution itself. When the stock stops trading, no individual shareholder knows specifically whether they own the 100 Million real shares or the 500,000 fake ones not yet settled. The presumption is everybody loses. Those that received the money from the sale of unregistered securities walk away from all financial obligations and liabilities. Novels gig if you can get it.
This thus brings up the last question. What constitutes counterfeit?
To counterfeit a stock, the seller must have intent on passing something off as authentic to deceive.
At present the securities regulators have parsed meanings based on eventual settlement. The initial sale was done with intent to deceive but instead of a counterfeit share, an extended and unidentified IOU is provided therefore the stock sale was not counterfeit. With the IOU the SEC claims it is not counterfeit, it is a loan.
However, in the case of St. George Metals and other similar companies, the sale of a counterfeit security was in fact executed since the IOU can not be closed out. With the SEC pulling the registration of the security, thus restricting any future trading of the stock in the open market, the seller can never acquire the ultimate legitimized share to make good on delivery. The initial unsettled trade became a ruse. A high stakes pyramid scheme using counterfeit shares to deceive investors into buying what otherwise does not exist. A scheme orchestrated by Wall Street and supervised by Federal regulators. The unsettled trade became the sale of a counterfeit security.
Before people dismiss this argument because St. George Metals violated Securities Laws by not filing as required remember, two wrongs do not make a right. The SEC has no right to selectively decide who they will protect and who they won’t. Shareholders of St. George Metals had a right by law to receive what they purchased with real capital. By not forcing those who executed trades without intent on settlement violated several other securities laws and thus used this means to injure all shareholders of St. George Metals. For all we know it was the sale of excessive counterfeit shares that injured the business model SGGM had to achieve success.
Those questions will never be answered as the SEC refuses to aid corporations in understanding who their rightful shareholders are and how their stock trades in the open market. Those are secrets the SEC and industry institutions keep near and dear to their collective dark souls.
So how does the SEC explain away the counterfeit shares they themselves have proved existed? They won’t. The Commission is riddled in conflicted opinions and ignorance. Many within the Commission would willingly destroy every small investor and company so long as the Wall Street machine grows and prospers to finance our Nations wealthiest. Along with this destruction of the small investor and companies goes our nation’s economy and integrity.
St. George Metals is not simply an isolated event; the fraud of unsettled trades is an industry standard representative of years of abuse. The loss to investors over this abuse is near $1 Trillion and growing. Don’t shot the messenger, understand the symptom. St. George Metals is just another messenger.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005