Post by jcline on Dec 14, 2005 17:52:31 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
SEC Short Sided on Enforcements – December 14, 2005
David Patch
The news coming out of the Securities Industry yesterday was a telling tale of how ‘short sided’ the SEC is when it comes to taking action against short selling abuses.
In 2003 the NASD brought an enforcement action against Anthony Elgindy and brokerage firm Key West Securities for securities fraud and stock manipulation of Saf T Loc Inc. The NASD claims regarded illegal shorting to manipulate the price of the security.
The NASD’s enforcement action stemmed from an investigation into 1997 trading activities that concluded with a $102,000 fine against Elgindy and Key West Securities. The NASD enforcement action also barred Elgindy from having any future association with an NASD Member.
In March of 2004, while Elgindy and two former FBI Agents were on trial for criminal violations of securities fraud associated with illegal shorting, the SEC overturned the NASD’s ruling under appeal by Elgindy. The SEC claimed they couldn’t find enough evidence to convict within the NASD documents. The NASD thought they had adequate evidence and convicted, and the US prosecutor believed he had enough evidence to bring Elgindy under criminal indictment on similar trading patterns yet the SEC was still confused. The SEC still couldn’t figure out the pieces to the puzzle like everyone else so they agreed to let Elgindy loose.
In September 2004 the NASD appealed the SEC’s decision to the US Court citing that the SEC is undermining the NASD’s actions and authority. The US Court rejected the NASD’s appeal yesterday citing a lack of legal standing to appeal SEC’s decisions.
SEC Spokesman John Heine stated that the “Commission is pleased with the Decision” to Rueters while only providing myself with his patented “No Comment”. The guy definitely earns his Government paycheck.
Unfortunately the US Court did not rule on the evidence in the Elgindy case validating the SEC’s ruling, the court only ruled that the NASD had no authority to challenge the agencies position. Mr. Heine and the Commission dodged a bullet here as the US Courts upheld the time honored tradition that the SEC’s short sidedness could not be challenged. An inept government agency is still, after all, a government agency accountable to no one.
Fortunately, in 2005 the US Courts and a jury of 12 convicted Elgindy for securities fraud and stock manipulation through illegal shorting. In the case against Elgindy evidence was presented leading to further convictions of former FBI Agents as well as evidence of SEC Attorneys aiding Elgindy in obtaining information critical to his manipulative practices. The timeline presented in the US Prosecutors allegations of stock manipulation were – late 1990’s early 2000. The same time period as the NASD allegations.
For their part the SEC has yet to take any enforcement actions against Anthony Elgindy for stock manipulation. Instead the SEC derailed an NASD action and witnessed a DOJ conviction as the SEC sat on the sidelines and watched. Apparently the SEC still could not understand a manipulative short selling concept the rest of the agencies have picking up on. Lets hope that time on the sidelines was educational for those SEC Attorneys that stayed awake long enough to watch.
With the most recent US Court ruling, Anthony Elgindy will be free to continue former operations in the Industry once his jail time is served thanks to the Securities and Exchange Commission. The SEC clearing the way for an Elgindy return when they overturned the disbarment handed down by the NASD.
Recall that in the SEC investigation into Rhino Advisors for the short sale manipulation of Pennsylvania based Sedona Corporation, the SEC had evidence of Refco Securities involvement in the Rhino manipulation. While the SEC negotiated these past three years a soft settlement with the executives of Refco Securities over their involvement in the fraud Refco these same executives went out and reportedly defrauded the investing public over an accounting scandal after a highly touted IPO. Since the Refco scandal broke the SEC appears to have remained stagnated in their actions against the Refco executives deferring once again to the US Attorney’s Office for justice.
With that being said, it is becoming increasingly clear that the Securities and Exchange Commission has yet to understand that short sellers, like stock promoters, can manipulate our markets. The regulatory status of Anthony Elgindy is the perfect example of that statement.
The US prosecutor for the case against Elgindy, Kenneth Breen, reportedly identified to a reporter for TheStreet.com that in the US Attorney’s case against Elgindy the prosecutor presented evidence of over 40 companies being manipulated through illegal shorting. “Most were done through naked shorting.” Where was the SEC in protecting the investors for these companies?
In return for such evidence of abuse in the markets, and with nary a single prior regulatory conviction in short selling abuse, the SEC authored Regulation SHO. The SEC provisioned in the reform a clause that ultimately grandfathered all prior fraudulent acts from prosecution. The SEC claimed such actions were necessary to protect against upside volatility in overly abused stocks or in our markets. The SEC was short sided in integrity in order to protect short sellers.
For their part, members of the SEC like Asst. Director of Market Regulation James Brigagliano will publicly claim that the SEC will take rigorous enforcement against violators regardless of the grandfather clause. History proves otherwise as the only actions taken to date have been to overturn lower SRO level enforcement proceedings.
It is a sad time in our markets when the “Commission is pleased with a Decision” that ultimately derailed an NASD enforcement action that would have been in the best interests of the marketplace. To be proud of that is a testament to the lack of qualified people leading the Securities and Exchange Commission.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
An online newspaper reporting the issues of Securities Fraud
SEC Short Sided on Enforcements – December 14, 2005
David Patch
The news coming out of the Securities Industry yesterday was a telling tale of how ‘short sided’ the SEC is when it comes to taking action against short selling abuses.
In 2003 the NASD brought an enforcement action against Anthony Elgindy and brokerage firm Key West Securities for securities fraud and stock manipulation of Saf T Loc Inc. The NASD claims regarded illegal shorting to manipulate the price of the security.
The NASD’s enforcement action stemmed from an investigation into 1997 trading activities that concluded with a $102,000 fine against Elgindy and Key West Securities. The NASD enforcement action also barred Elgindy from having any future association with an NASD Member.
In March of 2004, while Elgindy and two former FBI Agents were on trial for criminal violations of securities fraud associated with illegal shorting, the SEC overturned the NASD’s ruling under appeal by Elgindy. The SEC claimed they couldn’t find enough evidence to convict within the NASD documents. The NASD thought they had adequate evidence and convicted, and the US prosecutor believed he had enough evidence to bring Elgindy under criminal indictment on similar trading patterns yet the SEC was still confused. The SEC still couldn’t figure out the pieces to the puzzle like everyone else so they agreed to let Elgindy loose.
In September 2004 the NASD appealed the SEC’s decision to the US Court citing that the SEC is undermining the NASD’s actions and authority. The US Court rejected the NASD’s appeal yesterday citing a lack of legal standing to appeal SEC’s decisions.
SEC Spokesman John Heine stated that the “Commission is pleased with the Decision” to Rueters while only providing myself with his patented “No Comment”. The guy definitely earns his Government paycheck.
Unfortunately the US Court did not rule on the evidence in the Elgindy case validating the SEC’s ruling, the court only ruled that the NASD had no authority to challenge the agencies position. Mr. Heine and the Commission dodged a bullet here as the US Courts upheld the time honored tradition that the SEC’s short sidedness could not be challenged. An inept government agency is still, after all, a government agency accountable to no one.
Fortunately, in 2005 the US Courts and a jury of 12 convicted Elgindy for securities fraud and stock manipulation through illegal shorting. In the case against Elgindy evidence was presented leading to further convictions of former FBI Agents as well as evidence of SEC Attorneys aiding Elgindy in obtaining information critical to his manipulative practices. The timeline presented in the US Prosecutors allegations of stock manipulation were – late 1990’s early 2000. The same time period as the NASD allegations.
For their part the SEC has yet to take any enforcement actions against Anthony Elgindy for stock manipulation. Instead the SEC derailed an NASD action and witnessed a DOJ conviction as the SEC sat on the sidelines and watched. Apparently the SEC still could not understand a manipulative short selling concept the rest of the agencies have picking up on. Lets hope that time on the sidelines was educational for those SEC Attorneys that stayed awake long enough to watch.
With the most recent US Court ruling, Anthony Elgindy will be free to continue former operations in the Industry once his jail time is served thanks to the Securities and Exchange Commission. The SEC clearing the way for an Elgindy return when they overturned the disbarment handed down by the NASD.
Recall that in the SEC investigation into Rhino Advisors for the short sale manipulation of Pennsylvania based Sedona Corporation, the SEC had evidence of Refco Securities involvement in the Rhino manipulation. While the SEC negotiated these past three years a soft settlement with the executives of Refco Securities over their involvement in the fraud Refco these same executives went out and reportedly defrauded the investing public over an accounting scandal after a highly touted IPO. Since the Refco scandal broke the SEC appears to have remained stagnated in their actions against the Refco executives deferring once again to the US Attorney’s Office for justice.
With that being said, it is becoming increasingly clear that the Securities and Exchange Commission has yet to understand that short sellers, like stock promoters, can manipulate our markets. The regulatory status of Anthony Elgindy is the perfect example of that statement.
The US prosecutor for the case against Elgindy, Kenneth Breen, reportedly identified to a reporter for TheStreet.com that in the US Attorney’s case against Elgindy the prosecutor presented evidence of over 40 companies being manipulated through illegal shorting. “Most were done through naked shorting.” Where was the SEC in protecting the investors for these companies?
In return for such evidence of abuse in the markets, and with nary a single prior regulatory conviction in short selling abuse, the SEC authored Regulation SHO. The SEC provisioned in the reform a clause that ultimately grandfathered all prior fraudulent acts from prosecution. The SEC claimed such actions were necessary to protect against upside volatility in overly abused stocks or in our markets. The SEC was short sided in integrity in order to protect short sellers.
For their part, members of the SEC like Asst. Director of Market Regulation James Brigagliano will publicly claim that the SEC will take rigorous enforcement against violators regardless of the grandfather clause. History proves otherwise as the only actions taken to date have been to overturn lower SRO level enforcement proceedings.
It is a sad time in our markets when the “Commission is pleased with a Decision” that ultimately derailed an NASD enforcement action that would have been in the best interests of the marketplace. To be proud of that is a testament to the lack of qualified people leading the Securities and Exchange Commission.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005