Post by jannikki on Jun 13, 2007 23:16:16 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
SEC Throws Investors under the Bus – June 13, 2007
David Patch
Hellooooo can we get a Commission staff that understands actual securities laws and capital markets?
Today, in an open public hearing at the Securities and Exchange Commission the Commission staff, specifically Annette Nazareth, Roel Campos, and Kathy Casey presented to the witnesses their lack understanding of basic security law and market operations. The staff informed the abused public investor and abused public companies how and why each has been thrown under the bus to protect the revenues of financial services operations functioning outside of US securities laws.
Each Commissioner, in their opening remarks towards a vote on short sale reforms, continued to misunderstand the legalities of a short squeeze in the capital markets. Volatility of short squeezes due to the close out of persistent trade fails, fails that should not exist in the first place, is not illegal. They are the market response to a previous market reaction. The short squeeze created by the forced settlement of trades is as legal as the short sale itself. The Commission is actually manipulating a market to adjust laws otherwise.
If a member elects to accumulate fails for a house account or client trade activities, that member is fully liable for the financial implications of such a business decision made. Unsuspecting investors are not to be used as the tokens for their actions.
The Commission staff all but admitted that the implementation of a 5th Amendment violating grandfather clause created in 2004/2005 was done to specifically prevent the volatility of a short squeeze against those that may have had a free pass on market manipulation for better than a decade. The daft panel identified that the settlement failures may be abusive, may be used as a vehicle to depress the price of a security but, to force the closure of these abusive trades may increase the price of a security and that is not what our market or the investing public need.
Hence the 2004/2005 grandfather provision into Regulation SHO.
But today the Commission staff voted unanimously to repeal this illegal provision created only recently. For the past 2.5 years the Commission has monitored the volatility index of the grandfather clause and has determined that to repeal it will not have the volatility impact on the capital markets they originally expected and therefore it is risk less to repeal it. The Commission staff admitted that the grandfather clause was responsible for the persistence of settlement failures and was responsible for the masking of abusive short selling, but at least it prevented the short squeeze from financially impacting those manipulating the marketplace.
Priorities people, priorities.
According to Commissioner Annette Nazareth Abusive naked short selling can “depress the price of securities to the detriment of the investors.” So her response to such manipulation is to take those securities illegally depressed and remove the shield used to aid that depression now that we are assured a recovery from the manipulation will not take place, the shield being the grandfather clause.
Wasn’t Nazareth director of the division of Market Regulation when this brainchild grandfather clause was created?
My take on this issue has always been that had the SEC been the sheriff in your city or town, they would give every murderer a six shooter full of bullets and grandfather ever murder committed with the six bullets they provided. They only murders these sheriff’s want to control are those that take place after the first six are spent. Today the grandfather clause is allowed to destroy an investor and business base but only to certain legalized limits; payola for being a participant.
Clearly these political appointees sold out on investors to protect the rights of criminals; Wall Street crooks who would steal blind your crippled neighbor.
I for one would just like, for once, the Commission to openly explain to the investing public why a short squeeze that takes place on a manipulated stock is a negative event. How does a short squeeze precipitated by the closure of settlement failures even transpire without the abuse of settlement failures to begin with? I would also like to understand where the Commission stands on market corrections that created the dot.com crash of the late 1990’s. Was that volatility good for the marketplace or was those losses and market abuses acceptable behavior because….prices were declining. Who gave the Commission the authority to manipulate the pricing of securities?
Forgive me; I almost interjected logic into an illogical thought.
To compromise the SEC’s position further regarding this issue, the Commission staff admitted that the exemptions that have been created specifically for the profitability of the options market maker are a key component to the persistent settlement failures in the system. Instead of repealing this exemption, or at least tightening the reigns on this fraud, the Commission staff voted to delay any rule changes until they put up new options for public comment. The Commission was concerned about incorporating law not open for public comment as part of Federal policy.
Re-propose a rule while keping the public at risk? Is that how the SEC operates?
For those with a memory ask yourself where the SEC re-proposal of the grandfather clause was? Funny how that last minute insertion into law was never provided to the public for comment and ironically it was that specific provision that the SEC now admits was aiding in the continuation of market fraud.
Apparently the SEC rules by different laws when it comes to investor losses vs. financial services losses. The SEC willing to err on the side of the market members under all circumstances as retail investors and public companies are merely the sacrificial lambs for these greedy and corrupt operations.
Chairman Cox and his staff sold out the public in 2004/2005 and have sold out the investing public here again today. All the accolades and all the pomp and circumstance that surrounded today’s hearing are meaningless to those the SEC admits were victimized and for whom the SEC is solely responsible. The Division of Market Regulation showed complete arrogance to investor concerns and denied the abuse existed until the denial could no longer hold water.
I suggest the next time the SEC takes “aggressive steps” to address the abuses of naked short selling and the settlement failures that result from such abuses that efforts are taken to bring the violators to justice. There is no greater penalty to deter future abuses than the penalty of financial burdens. Protecting the market these abusers created is not the solution and lord knows the SEC enforcement staff couldn’t find a crook in a Federal penitentiary.
On a side note, SEC Commissioner Atkins attempted to provide the SEC’s Office of Economic Affairs with an opportunity to toot their horn regarding their analysis of this critical market data. Amazingly the OEA responded with an amateurish analysis that the Commissioner himself did not recognize as flawed.
The OEA analysis on the performance of the 2004 reforms took the averaging of data for the 6 months prior to SHO to that of the first 26 months post SHO. As pointed out several times, averaging in a moving market is meaningless as the critical metrics involve comparisons of past to most recent times. A statistician also recognizes that a control must be used in an statistical analysis and there is no control comparing the batting average of a player after 6 games to that of 26 games.
I just don’t get how we put such foolish and conflicted people into such critical offices. I suggest a quick back to school day for the OEA if the SEC is to rely on their analysis.
My recommendation to address this problem should anybody care: Since the SEC fails to want to address the market making exemptions and the abuses of the bona fide market making activities I propose a law that requires the following:
Any market maker with an obligation to close out a fails to deliver can not make a market in that security at the time of the close out requirement. It is a clear conflict of interest to be under an obligation to purchase shares to settle a pre-existing fail and be allowed to control the offer of that same security using the market making exemption of bona-fide market making. To do so allow the market maker to create an appearance of a depressed market and then buy into sellers who think this market is representative of where the other sellers are.
Hey you wanted the truth; you want fiction go read Herb Greenberg.
For more on this issue please visit the Host site at www.investigatethesec.com
Copyright 2007(posted with permission)
An online newspaper reporting the issues of Securities Fraud
SEC Throws Investors under the Bus – June 13, 2007
David Patch
Hellooooo can we get a Commission staff that understands actual securities laws and capital markets?
Today, in an open public hearing at the Securities and Exchange Commission the Commission staff, specifically Annette Nazareth, Roel Campos, and Kathy Casey presented to the witnesses their lack understanding of basic security law and market operations. The staff informed the abused public investor and abused public companies how and why each has been thrown under the bus to protect the revenues of financial services operations functioning outside of US securities laws.
Each Commissioner, in their opening remarks towards a vote on short sale reforms, continued to misunderstand the legalities of a short squeeze in the capital markets. Volatility of short squeezes due to the close out of persistent trade fails, fails that should not exist in the first place, is not illegal. They are the market response to a previous market reaction. The short squeeze created by the forced settlement of trades is as legal as the short sale itself. The Commission is actually manipulating a market to adjust laws otherwise.
If a member elects to accumulate fails for a house account or client trade activities, that member is fully liable for the financial implications of such a business decision made. Unsuspecting investors are not to be used as the tokens for their actions.
The Commission staff all but admitted that the implementation of a 5th Amendment violating grandfather clause created in 2004/2005 was done to specifically prevent the volatility of a short squeeze against those that may have had a free pass on market manipulation for better than a decade. The daft panel identified that the settlement failures may be abusive, may be used as a vehicle to depress the price of a security but, to force the closure of these abusive trades may increase the price of a security and that is not what our market or the investing public need.
Hence the 2004/2005 grandfather provision into Regulation SHO.
But today the Commission staff voted unanimously to repeal this illegal provision created only recently. For the past 2.5 years the Commission has monitored the volatility index of the grandfather clause and has determined that to repeal it will not have the volatility impact on the capital markets they originally expected and therefore it is risk less to repeal it. The Commission staff admitted that the grandfather clause was responsible for the persistence of settlement failures and was responsible for the masking of abusive short selling, but at least it prevented the short squeeze from financially impacting those manipulating the marketplace.
Priorities people, priorities.
According to Commissioner Annette Nazareth Abusive naked short selling can “depress the price of securities to the detriment of the investors.” So her response to such manipulation is to take those securities illegally depressed and remove the shield used to aid that depression now that we are assured a recovery from the manipulation will not take place, the shield being the grandfather clause.
Wasn’t Nazareth director of the division of Market Regulation when this brainchild grandfather clause was created?
My take on this issue has always been that had the SEC been the sheriff in your city or town, they would give every murderer a six shooter full of bullets and grandfather ever murder committed with the six bullets they provided. They only murders these sheriff’s want to control are those that take place after the first six are spent. Today the grandfather clause is allowed to destroy an investor and business base but only to certain legalized limits; payola for being a participant.
Clearly these political appointees sold out on investors to protect the rights of criminals; Wall Street crooks who would steal blind your crippled neighbor.
I for one would just like, for once, the Commission to openly explain to the investing public why a short squeeze that takes place on a manipulated stock is a negative event. How does a short squeeze precipitated by the closure of settlement failures even transpire without the abuse of settlement failures to begin with? I would also like to understand where the Commission stands on market corrections that created the dot.com crash of the late 1990’s. Was that volatility good for the marketplace or was those losses and market abuses acceptable behavior because….prices were declining. Who gave the Commission the authority to manipulate the pricing of securities?
Forgive me; I almost interjected logic into an illogical thought.
To compromise the SEC’s position further regarding this issue, the Commission staff admitted that the exemptions that have been created specifically for the profitability of the options market maker are a key component to the persistent settlement failures in the system. Instead of repealing this exemption, or at least tightening the reigns on this fraud, the Commission staff voted to delay any rule changes until they put up new options for public comment. The Commission was concerned about incorporating law not open for public comment as part of Federal policy.
Re-propose a rule while keping the public at risk? Is that how the SEC operates?
For those with a memory ask yourself where the SEC re-proposal of the grandfather clause was? Funny how that last minute insertion into law was never provided to the public for comment and ironically it was that specific provision that the SEC now admits was aiding in the continuation of market fraud.
Apparently the SEC rules by different laws when it comes to investor losses vs. financial services losses. The SEC willing to err on the side of the market members under all circumstances as retail investors and public companies are merely the sacrificial lambs for these greedy and corrupt operations.
Chairman Cox and his staff sold out the public in 2004/2005 and have sold out the investing public here again today. All the accolades and all the pomp and circumstance that surrounded today’s hearing are meaningless to those the SEC admits were victimized and for whom the SEC is solely responsible. The Division of Market Regulation showed complete arrogance to investor concerns and denied the abuse existed until the denial could no longer hold water.
I suggest the next time the SEC takes “aggressive steps” to address the abuses of naked short selling and the settlement failures that result from such abuses that efforts are taken to bring the violators to justice. There is no greater penalty to deter future abuses than the penalty of financial burdens. Protecting the market these abusers created is not the solution and lord knows the SEC enforcement staff couldn’t find a crook in a Federal penitentiary.
On a side note, SEC Commissioner Atkins attempted to provide the SEC’s Office of Economic Affairs with an opportunity to toot their horn regarding their analysis of this critical market data. Amazingly the OEA responded with an amateurish analysis that the Commissioner himself did not recognize as flawed.
The OEA analysis on the performance of the 2004 reforms took the averaging of data for the 6 months prior to SHO to that of the first 26 months post SHO. As pointed out several times, averaging in a moving market is meaningless as the critical metrics involve comparisons of past to most recent times. A statistician also recognizes that a control must be used in an statistical analysis and there is no control comparing the batting average of a player after 6 games to that of 26 games.
I just don’t get how we put such foolish and conflicted people into such critical offices. I suggest a quick back to school day for the OEA if the SEC is to rely on their analysis.
My recommendation to address this problem should anybody care: Since the SEC fails to want to address the market making exemptions and the abuses of the bona fide market making activities I propose a law that requires the following:
Any market maker with an obligation to close out a fails to deliver can not make a market in that security at the time of the close out requirement. It is a clear conflict of interest to be under an obligation to purchase shares to settle a pre-existing fail and be allowed to control the offer of that same security using the market making exemption of bona-fide market making. To do so allow the market maker to create an appearance of a depressed market and then buy into sellers who think this market is representative of where the other sellers are.
Hey you wanted the truth; you want fiction go read Herb Greenberg.
For more on this issue please visit the Host site at www.investigatethesec.com
Copyright 2007(posted with permission)