Post by jannikki on Mar 15, 2007 17:44:56 GMT -4
Cox:
SEC's Cox "SHO has proven insufficient to stop the problem"
Location: Blogs Dave Patch's Blog
Posted by: dpatch
3/15/2007 6:22 AM
Straight from DC and the US Chamber Summit on Capital Markets is the story the mainstream financial media will not be writing about.
In the Q&A session with Chairman Cox one in the audience had the opportunity to hit Cox Squarely where he stands. Transcripts below:
AUDIENCE MEMBER: Chairman Cox, Jonathan Johnson, Overstock.com. You have mentioned in the past that abusive naked short selling is being used to manipulate stock prices down to the detriment of investors. Last month, the Chamber sent a letter requesting that Congress hold hearings on the issue and last night Bloomberg TV ran a piece, a special report, on this issue. What is the commission doing to stop this form of manipulation and when can we expect some action?
CHAIRMAN COX: Abusive naked short selling is of great concern to the entire Commission, to all of our members and the professional staff at the SEC. The regulation that was first adopted to get after this and related problems, Reg SHO, has proven insufficient to stop the problem. One of the reasons is the Grandfather provision in the rule as it was originally adopted, so we are now setting out, as you know, to eliminate that grandfather provision. And we will do more. Just as Congress may well have hearings on this issue and seek to get more information, so too are we looking at this. As you know, there's a technological side to this. This is very closely connected to our system of clearing and settlement in a very very big market, and we want to make sure that we use technology as our friend in relating, potentially and at all times, ownership and particular shares rather than waiting until the end of an arbitrary period of time to match those things up. It's those sorts of things that I think will eventually help us, I think, put an end to this kind of abuse. And I know that people victimized by it have a great deal of right on their side to complain about it.
CHAIRMAN DONAHUE: You have a lot of support from here in getting that done. Just let us know how we can get some muscle behind it. It is a serious challenge.
I’m sorry, did the Chairman say that Regulation SHO has not worked? Doesn’t that imply that FRAUD exists and is not being corrected? Was this paltry $2 Million parking ticked to Goldman Sachs supposed to be the catch all deterrent?
For a decade the SEC has dismissed the allegations of “unsophisticated investors” and of small business issuers that they were being manipulated. We were all “loonies” that simply did not understand the markets and this issue we speak of is not real.
Wall Street and the media lobbied hard dismissing this issue. In fact the same individuals that claim “those that complain about short selling are simply those deflecting the real issues” are now they are the ones complaining that settlement issues, lawsuits, and those that report on it are all barking up the wrong tree. It almost sounds like short sellers who go after CEO’s for what they call distractions are creating their own…Distractions.
And for the Chairman to say “And I know that people victimized by it have a great deal of right on their side to complain about it.” That is not what Annette Nazareth had to say to Floyd Norris in 2005. In fact Ms. Nazareth claimed we were simply whiners mad because our stocks did not go up. I guess Nazareth doesn’t believe victims have a right to whine.
I guess after all is said and done we, this small universe of individuals, proved that we were smarter than all of Wall Street and Wall Street regulators.
Location: Blogs Dave Patch's Blog
Posted by: dpatch
3/15/2007 6:22 AM
Straight from DC and the US Chamber Summit on Capital Markets is the story the mainstream financial media will not be writing about.
In the Q&A session with Chairman Cox one in the audience had the opportunity to hit Cox Squarely where he stands. Transcripts below:
AUDIENCE MEMBER: Chairman Cox, Jonathan Johnson, Overstock.com. You have mentioned in the past that abusive naked short selling is being used to manipulate stock prices down to the detriment of investors. Last month, the Chamber sent a letter requesting that Congress hold hearings on the issue and last night Bloomberg TV ran a piece, a special report, on this issue. What is the commission doing to stop this form of manipulation and when can we expect some action?
CHAIRMAN COX: Abusive naked short selling is of great concern to the entire Commission, to all of our members and the professional staff at the SEC. The regulation that was first adopted to get after this and related problems, Reg SHO, has proven insufficient to stop the problem. One of the reasons is the Grandfather provision in the rule as it was originally adopted, so we are now setting out, as you know, to eliminate that grandfather provision. And we will do more. Just as Congress may well have hearings on this issue and seek to get more information, so too are we looking at this. As you know, there's a technological side to this. This is very closely connected to our system of clearing and settlement in a very very big market, and we want to make sure that we use technology as our friend in relating, potentially and at all times, ownership and particular shares rather than waiting until the end of an arbitrary period of time to match those things up. It's those sorts of things that I think will eventually help us, I think, put an end to this kind of abuse. And I know that people victimized by it have a great deal of right on their side to complain about it.
CHAIRMAN DONAHUE: You have a lot of support from here in getting that done. Just let us know how we can get some muscle behind it. It is a serious challenge.
I’m sorry, did the Chairman say that Regulation SHO has not worked? Doesn’t that imply that FRAUD exists and is not being corrected? Was this paltry $2 Million parking ticked to Goldman Sachs supposed to be the catch all deterrent?
For a decade the SEC has dismissed the allegations of “unsophisticated investors” and of small business issuers that they were being manipulated. We were all “loonies” that simply did not understand the markets and this issue we speak of is not real.
Wall Street and the media lobbied hard dismissing this issue. In fact the same individuals that claim “those that complain about short selling are simply those deflecting the real issues” are now they are the ones complaining that settlement issues, lawsuits, and those that report on it are all barking up the wrong tree. It almost sounds like short sellers who go after CEO’s for what they call distractions are creating their own…Distractions.
And for the Chairman to say “And I know that people victimized by it have a great deal of right on their side to complain about it.” That is not what Annette Nazareth had to say to Floyd Norris in 2005. In fact Ms. Nazareth claimed we were simply whiners mad because our stocks did not go up. I guess Nazareth doesn’t believe victims have a right to whine.
I guess after all is said and done we, this small universe of individuals, proved that we were smarter than all of Wall Street and Wall Street regulators.
We identified 10 years ago that a problem existed that the regulators, members of Wall Street, and regulators all denied existed.
We, the “unintelligent investors” identified in June 2004, when the SEC voted approval of the present Regulation SHO law, that the law was inadequate to resolve the problem. Wall Street was happy with the law, the crooks were happy with the law, SIFMA was happy to get another boatload of Wall Street funding for a job well done, and the regulators were too stupid to know otherwise but we knew. We came to conclusions the experts could not come to. We did so because we had the open minds, the capacity to see reality.
As for the Greenberg’s, Weiss’, Boyd’s, Nocera’s, McLean’s etc…while the data speaks for itself. These members of the financial media have the integrity of armed robber going into an old age community. They fail to reposnd to the needs of the people because they fear their careers will be destroyed when their crooked sources dry up.
Clearly there are members of the media in attendance at the Summit as they are constantly reporting the speaks positions being argued. Funny how 100% of them overlooked this comment.
e identified 10 years ago that a problem existed that the regulators, members of Wall Street, and regulators all denied existed.
We, the “unintelligent investors” identified in June 2004, when the SEC voted approval of the present Regulation SHO law, that the law was inadequate to resolve the problem. Wall Street was happy with the law, the crooks were happy with the law, SIFMA was happy to get another boatload of Wall Street funding for a job well done, and the regulators were too stupid to know otherwise but we knew. We came to conclusions the experts could not come to. We did so because we had the open minds, the capacity to see reality.
As for the Greenberg’s, Weiss’, Boyd’s, Nocera’s, McLean’s etc…while the data speaks for itself. These members of the financial media have the integrity of armed robber going into an old age community. They fail to reposnd to the needs of the people because they fear their careers will be destroyed when their crooked sources dry up.
Clearly there are members of the media in attendance at the Summit as they are constantly reporting the speaks positions being argued. Funny how 100% of them overlooked this comment.
--------------------------------------------------------------------------------
From: Google Alerts [mailto:googlealerts-noreply@google.com]
Sent: Wednesday, February 28, 2007 1:17 PM
To: b.burrell
Subject: Google Alert -Wall Street vs. Overstock, From Forbes
Google News Alert for: Naked Short Selling
Wall Street Vs. Overstock
Forbes - NY, USA
Shares of Overstock are down more than 70% since shortly after Byrne began his anti-naked-short-selling crusade two years ago. ...
See all stories on this topic
Wall Street Vs. Overstock
Liz Moyer, 02.28.07, 12:42 PM ET
Utah's legislature is about to repeal a controversial 2006 law designed to make it harder for brokerage firms to look the other way in cases of abusive short-selling.
On Tuesday evening, the governor's office sent a letter to the state's speaker of the House and the majority leader in the Senate asking that the law be repealed, citing concerns that enforcement of it would bring a torrent of legal action and possibly make it harder for Utah and other states to regulate the activities of brokerages.
"There is a substantial risk that Congress will act to pre-empt state regulatory powers even further," the letter reads.
The state's House of Representatives is a vote away from meeting the governor's request. The bill to repeal the law was introduced in the state Senate last week by Curtis Bramble, Republican from Provo , who ironically was the same person to push the so-called "anti-naked-short-selling" bill through a special session of the legislature last year.
The law would have required brokerages to pay Utah-based companies a certain amount of money per day for failing to report stock-trade delivery failures to the state securities regulator. Salt Lake City-based Overstock.com (nasdaq: OSTK - news - people ) was the law's chief proponent last year, and its hired lobbyists have been working furiously to prevent its repeal in the last few weeks.
Utah's House of Representatives has until midnight Wednesday to vote on a repeal before the legislative session ends. Last-minute lobbying by the law's proponents might block a vote from happening.
A local newspaper described a contentious meeting Monday organized by Utah 's speaker of the House and representatives of the securities industry lobby, the state attorney general, the governor's office and Overstock's counsel. Descriptions of the meeting were reminiscent of the physical battles fought in the Taiwanese legislature on a regular basis.
Tuesday night, Overstock Chief Executive Patrick Byrne compared Bramble's about-face on the issue to a betrayal, using a reference to the movie Jerry Maguire to make his point. "It's like that scene where Jerry McGuire figures out that a prospect's father has sold him out by signing with a competitor. McGuire says, 'Now. Wait. Tell me you didn't sign. Because I'm still sort of moved by your "my word is stronger'n oak" thing,' " Bryne wrote in an e-mail.
Byrne said Bramble had repeatedly told him in the last year that he wouldn't move to repeal the law. "In the year I've known Bramble [he] has given me a dramatic 'look you in the eye' speech three times. A few weeks ago I got it again: 'I want to look you in the eye and tell you, I will not let them repeal this bill,' " Bryne wrote in the e-mail. "He turned out to be a squish and a yellowbelly. What a surprise."
In recent weeks, the tide turned, in part because of an intense lobbying effort by Wall Street's industry association, the Securities Industry and Financial Markets Association. SIFMA filed suit against the state last summer in a Utah federal court, claiming federal laws pre-empt any state attempts to regulate the securities industry.
Gov. Jon Huntsman caved in to the threat in July and agreed to hold off on enforcing the law until this June. In an interview Tuesday morning, before the governor's office sent the letter asking for a repeal of the law, Bramble said there was a fear that SIFMA would "take the issue much further" and make it harder for Utah and other states to regulate brokerages.
Similar bills have been pulled or held back from consideration in states ranging from Arizona to Virginia in recent weeks. A bill introduced in Arizona in January was pulled by its sponsor. It would have gone an extra step further than the Utah law and imposed penalties on brokerages for not reporting trade delivery failures in any stock, not just the stock of Arizona-based companies.
A repeal would mean one defeat in the multifront battle being waged by Overstock's Byrne to call attention at the federal regulatory level to trading abuses in the stock market. Earlier this month, Overstock filed suit in a California state court against 10 big Wall Street brokerages, accusing them of engaging in a massive market manipulation meant to drive down Overstock's share price by allowing naked short-sellers to engage in stock trade settlement failures.
In normal trading, stock sale transactions are supposed to settle in three days. Short-sellers borrow stocks and sell them, hoping the stock price will fall and they can borrow back the shares at a lower price and buy them back to close out the loan. Naked short-sellers don't borrow the shares and thus fail to deliver them to the buyers until they close out their positions.
Some stocks, including those of Overstock, have languished for two years on lists of heavily shorted stocks that have large and persistent trade delivery failures. These lists are maintained by the major stock exchanges.
Overstock's lawsuit was controversial even inside the company. A board member, Silicon Valley tech banker John Fisher, resigned as a director last week because he disagreed with it.
The U.S. Securities and Exchange Commission is considering tightening short-selling rules that would partially eliminate trading abuses, including naked short-selling, that Byrne and others have said artificially drive down the prices of stocks. Shares of Overstock are down more than 70% since shortly after Byrne began his anti-naked-short-selling crusade two years ago.
The SEC has acknowledged that large and persistent trade settlement failures are an indication of abusive trading. Still, the SEC has promised to make a ruling on amendments to short-selling rules, and that promise keeps being pushed back. A ruling isn't expected until the summer, at the earliest.
The Utah law would have been the first state law to attempt to take over jurisdiction from federal regulators, who seem unwilling or unable to stop the abuses. The letter from the Utah governor to his state legislators on Tuesday left open the possibility that the issue would be revisited if the SEC failed to deliver on its promise to clean up the system.
"If federal regulators fail to carry through on their commitment to implement effective national solutions, this office will join with you next year or in a special session to reassert control and protect Utah investors and ensure the integrity of the marketplace," the letter reads.
thesanitycheck.com/Blogs/DavePatchsBlog/tabid/66/Default.aspx
SEC's Cox "SHO has proven insufficient to stop the problem"
Location: Blogs Dave Patch's Blog
Posted by: dpatch
3/15/2007 6:22 AM
Straight from DC and the US Chamber Summit on Capital Markets is the story the mainstream financial media will not be writing about.
In the Q&A session with Chairman Cox one in the audience had the opportunity to hit Cox Squarely where he stands. Transcripts below:
AUDIENCE MEMBER: Chairman Cox, Jonathan Johnson, Overstock.com. You have mentioned in the past that abusive naked short selling is being used to manipulate stock prices down to the detriment of investors. Last month, the Chamber sent a letter requesting that Congress hold hearings on the issue and last night Bloomberg TV ran a piece, a special report, on this issue. What is the commission doing to stop this form of manipulation and when can we expect some action?
CHAIRMAN COX: Abusive naked short selling is of great concern to the entire Commission, to all of our members and the professional staff at the SEC. The regulation that was first adopted to get after this and related problems, Reg SHO, has proven insufficient to stop the problem. One of the reasons is the Grandfather provision in the rule as it was originally adopted, so we are now setting out, as you know, to eliminate that grandfather provision. And we will do more. Just as Congress may well have hearings on this issue and seek to get more information, so too are we looking at this. As you know, there's a technological side to this. This is very closely connected to our system of clearing and settlement in a very very big market, and we want to make sure that we use technology as our friend in relating, potentially and at all times, ownership and particular shares rather than waiting until the end of an arbitrary period of time to match those things up. It's those sorts of things that I think will eventually help us, I think, put an end to this kind of abuse. And I know that people victimized by it have a great deal of right on their side to complain about it.
CHAIRMAN DONAHUE: You have a lot of support from here in getting that done. Just let us know how we can get some muscle behind it. It is a serious challenge.
I’m sorry, did the Chairman say that Regulation SHO has not worked? Doesn’t that imply that FRAUD exists and is not being corrected? Was this paltry $2 Million parking ticked to Goldman Sachs supposed to be the catch all deterrent?
For a decade the SEC has dismissed the allegations of “unsophisticated investors” and of small business issuers that they were being manipulated. We were all “loonies” that simply did not understand the markets and this issue we speak of is not real.
Wall Street and the media lobbied hard dismissing this issue. In fact the same individuals that claim “those that complain about short selling are simply those deflecting the real issues” are now they are the ones complaining that settlement issues, lawsuits, and those that report on it are all barking up the wrong tree. It almost sounds like short sellers who go after CEO’s for what they call distractions are creating their own…Distractions.
And for the Chairman to say “And I know that people victimized by it have a great deal of right on their side to complain about it.” That is not what Annette Nazareth had to say to Floyd Norris in 2005. In fact Ms. Nazareth claimed we were simply whiners mad because our stocks did not go up. I guess Nazareth doesn’t believe victims have a right to whine.
I guess after all is said and done we, this small universe of individuals, proved that we were smarter than all of Wall Street and Wall Street regulators.
Location: Blogs Dave Patch's Blog
Posted by: dpatch
3/15/2007 6:22 AM
Straight from DC and the US Chamber Summit on Capital Markets is the story the mainstream financial media will not be writing about.
In the Q&A session with Chairman Cox one in the audience had the opportunity to hit Cox Squarely where he stands. Transcripts below:
AUDIENCE MEMBER: Chairman Cox, Jonathan Johnson, Overstock.com. You have mentioned in the past that abusive naked short selling is being used to manipulate stock prices down to the detriment of investors. Last month, the Chamber sent a letter requesting that Congress hold hearings on the issue and last night Bloomberg TV ran a piece, a special report, on this issue. What is the commission doing to stop this form of manipulation and when can we expect some action?
CHAIRMAN COX: Abusive naked short selling is of great concern to the entire Commission, to all of our members and the professional staff at the SEC. The regulation that was first adopted to get after this and related problems, Reg SHO, has proven insufficient to stop the problem. One of the reasons is the Grandfather provision in the rule as it was originally adopted, so we are now setting out, as you know, to eliminate that grandfather provision. And we will do more. Just as Congress may well have hearings on this issue and seek to get more information, so too are we looking at this. As you know, there's a technological side to this. This is very closely connected to our system of clearing and settlement in a very very big market, and we want to make sure that we use technology as our friend in relating, potentially and at all times, ownership and particular shares rather than waiting until the end of an arbitrary period of time to match those things up. It's those sorts of things that I think will eventually help us, I think, put an end to this kind of abuse. And I know that people victimized by it have a great deal of right on their side to complain about it.
CHAIRMAN DONAHUE: You have a lot of support from here in getting that done. Just let us know how we can get some muscle behind it. It is a serious challenge.
I’m sorry, did the Chairman say that Regulation SHO has not worked? Doesn’t that imply that FRAUD exists and is not being corrected? Was this paltry $2 Million parking ticked to Goldman Sachs supposed to be the catch all deterrent?
For a decade the SEC has dismissed the allegations of “unsophisticated investors” and of small business issuers that they were being manipulated. We were all “loonies” that simply did not understand the markets and this issue we speak of is not real.
Wall Street and the media lobbied hard dismissing this issue. In fact the same individuals that claim “those that complain about short selling are simply those deflecting the real issues” are now they are the ones complaining that settlement issues, lawsuits, and those that report on it are all barking up the wrong tree. It almost sounds like short sellers who go after CEO’s for what they call distractions are creating their own…Distractions.
And for the Chairman to say “And I know that people victimized by it have a great deal of right on their side to complain about it.” That is not what Annette Nazareth had to say to Floyd Norris in 2005. In fact Ms. Nazareth claimed we were simply whiners mad because our stocks did not go up. I guess Nazareth doesn’t believe victims have a right to whine.
I guess after all is said and done we, this small universe of individuals, proved that we were smarter than all of Wall Street and Wall Street regulators.
We identified 10 years ago that a problem existed that the regulators, members of Wall Street, and regulators all denied existed.
We, the “unintelligent investors” identified in June 2004, when the SEC voted approval of the present Regulation SHO law, that the law was inadequate to resolve the problem. Wall Street was happy with the law, the crooks were happy with the law, SIFMA was happy to get another boatload of Wall Street funding for a job well done, and the regulators were too stupid to know otherwise but we knew. We came to conclusions the experts could not come to. We did so because we had the open minds, the capacity to see reality.
As for the Greenberg’s, Weiss’, Boyd’s, Nocera’s, McLean’s etc…while the data speaks for itself. These members of the financial media have the integrity of armed robber going into an old age community. They fail to reposnd to the needs of the people because they fear their careers will be destroyed when their crooked sources dry up.
Clearly there are members of the media in attendance at the Summit as they are constantly reporting the speaks positions being argued. Funny how 100% of them overlooked this comment.
e identified 10 years ago that a problem existed that the regulators, members of Wall Street, and regulators all denied existed.
We, the “unintelligent investors” identified in June 2004, when the SEC voted approval of the present Regulation SHO law, that the law was inadequate to resolve the problem. Wall Street was happy with the law, the crooks were happy with the law, SIFMA was happy to get another boatload of Wall Street funding for a job well done, and the regulators were too stupid to know otherwise but we knew. We came to conclusions the experts could not come to. We did so because we had the open minds, the capacity to see reality.
As for the Greenberg’s, Weiss’, Boyd’s, Nocera’s, McLean’s etc…while the data speaks for itself. These members of the financial media have the integrity of armed robber going into an old age community. They fail to reposnd to the needs of the people because they fear their careers will be destroyed when their crooked sources dry up.
Clearly there are members of the media in attendance at the Summit as they are constantly reporting the speaks positions being argued. Funny how 100% of them overlooked this comment.
--------------------------------------------------------------------------------
From: Google Alerts [mailto:googlealerts-noreply@google.com]
Sent: Wednesday, February 28, 2007 1:17 PM
To: b.burrell
Subject: Google Alert -Wall Street vs. Overstock, From Forbes
Google News Alert for: Naked Short Selling
Wall Street Vs. Overstock
Forbes - NY, USA
Shares of Overstock are down more than 70% since shortly after Byrne began his anti-naked-short-selling crusade two years ago. ...
See all stories on this topic
Wall Street Vs. Overstock
Liz Moyer, 02.28.07, 12:42 PM ET
Utah's legislature is about to repeal a controversial 2006 law designed to make it harder for brokerage firms to look the other way in cases of abusive short-selling.
On Tuesday evening, the governor's office sent a letter to the state's speaker of the House and the majority leader in the Senate asking that the law be repealed, citing concerns that enforcement of it would bring a torrent of legal action and possibly make it harder for Utah and other states to regulate the activities of brokerages.
"There is a substantial risk that Congress will act to pre-empt state regulatory powers even further," the letter reads.
The state's House of Representatives is a vote away from meeting the governor's request. The bill to repeal the law was introduced in the state Senate last week by Curtis Bramble, Republican from Provo , who ironically was the same person to push the so-called "anti-naked-short-selling" bill through a special session of the legislature last year.
The law would have required brokerages to pay Utah-based companies a certain amount of money per day for failing to report stock-trade delivery failures to the state securities regulator. Salt Lake City-based Overstock.com (nasdaq: OSTK - news - people ) was the law's chief proponent last year, and its hired lobbyists have been working furiously to prevent its repeal in the last few weeks.
Utah's House of Representatives has until midnight Wednesday to vote on a repeal before the legislative session ends. Last-minute lobbying by the law's proponents might block a vote from happening.
A local newspaper described a contentious meeting Monday organized by Utah 's speaker of the House and representatives of the securities industry lobby, the state attorney general, the governor's office and Overstock's counsel. Descriptions of the meeting were reminiscent of the physical battles fought in the Taiwanese legislature on a regular basis.
Tuesday night, Overstock Chief Executive Patrick Byrne compared Bramble's about-face on the issue to a betrayal, using a reference to the movie Jerry Maguire to make his point. "It's like that scene where Jerry McGuire figures out that a prospect's father has sold him out by signing with a competitor. McGuire says, 'Now. Wait. Tell me you didn't sign. Because I'm still sort of moved by your "my word is stronger'n oak" thing,' " Bryne wrote in an e-mail.
Byrne said Bramble had repeatedly told him in the last year that he wouldn't move to repeal the law. "In the year I've known Bramble [he] has given me a dramatic 'look you in the eye' speech three times. A few weeks ago I got it again: 'I want to look you in the eye and tell you, I will not let them repeal this bill,' " Bryne wrote in the e-mail. "He turned out to be a squish and a yellowbelly. What a surprise."
In recent weeks, the tide turned, in part because of an intense lobbying effort by Wall Street's industry association, the Securities Industry and Financial Markets Association. SIFMA filed suit against the state last summer in a Utah federal court, claiming federal laws pre-empt any state attempts to regulate the securities industry.
Gov. Jon Huntsman caved in to the threat in July and agreed to hold off on enforcing the law until this June. In an interview Tuesday morning, before the governor's office sent the letter asking for a repeal of the law, Bramble said there was a fear that SIFMA would "take the issue much further" and make it harder for Utah and other states to regulate brokerages.
Similar bills have been pulled or held back from consideration in states ranging from Arizona to Virginia in recent weeks. A bill introduced in Arizona in January was pulled by its sponsor. It would have gone an extra step further than the Utah law and imposed penalties on brokerages for not reporting trade delivery failures in any stock, not just the stock of Arizona-based companies.
A repeal would mean one defeat in the multifront battle being waged by Overstock's Byrne to call attention at the federal regulatory level to trading abuses in the stock market. Earlier this month, Overstock filed suit in a California state court against 10 big Wall Street brokerages, accusing them of engaging in a massive market manipulation meant to drive down Overstock's share price by allowing naked short-sellers to engage in stock trade settlement failures.
In normal trading, stock sale transactions are supposed to settle in three days. Short-sellers borrow stocks and sell them, hoping the stock price will fall and they can borrow back the shares at a lower price and buy them back to close out the loan. Naked short-sellers don't borrow the shares and thus fail to deliver them to the buyers until they close out their positions.
Some stocks, including those of Overstock, have languished for two years on lists of heavily shorted stocks that have large and persistent trade delivery failures. These lists are maintained by the major stock exchanges.
Overstock's lawsuit was controversial even inside the company. A board member, Silicon Valley tech banker John Fisher, resigned as a director last week because he disagreed with it.
The U.S. Securities and Exchange Commission is considering tightening short-selling rules that would partially eliminate trading abuses, including naked short-selling, that Byrne and others have said artificially drive down the prices of stocks. Shares of Overstock are down more than 70% since shortly after Byrne began his anti-naked-short-selling crusade two years ago.
The SEC has acknowledged that large and persistent trade settlement failures are an indication of abusive trading. Still, the SEC has promised to make a ruling on amendments to short-selling rules, and that promise keeps being pushed back. A ruling isn't expected until the summer, at the earliest.
The Utah law would have been the first state law to attempt to take over jurisdiction from federal regulators, who seem unwilling or unable to stop the abuses. The letter from the Utah governor to his state legislators on Tuesday left open the possibility that the issue would be revisited if the SEC failed to deliver on its promise to clean up the system.
"If federal regulators fail to carry through on their commitment to implement effective national solutions, this office will join with you next year or in a special session to reassert control and protect Utah investors and ensure the integrity of the marketplace," the letter reads.
thesanitycheck.com/Blogs/DavePatchsBlog/tabid/66/Default.aspx