Post by jcline on Jan 7, 2006 11:12:04 GMT -4
No Longer Just biatch; Let’s Solve
Location: BlogsDave Patch's Blog
Posted by: Dave Patch 1/6/2006 9:44 PM
Welcome all.
Bob O’Brien had the awareness to put the efforts of all our separate mediums together into one, and it was the best move we, the TEAM, ever could have had. You are all part of that Team and essential to success. We now can speak as a united front, together, and solve a problem that has persisted for decades and has destroyed not only our present personal financial futures but also the futures of generations to come, if this problem is not corrected. Today, the bloggers listed are those willing to step out and take control - tomorrow you too may carry that torch.
Thank You Easter Bunny.
Okay, Down to Brass Tacks. I am an engineer, more analytical than an eloquent speaker. Hell, I am an Engineer -English is a foreign language so pardon all my screwups. But I am also a detailed person that wants to dig into legal guidelines and solve our collective problem. My blogs will be less satirical and more calculating. For those seeking amusement with their sermon, go to Bob and Mark’s blogs. They have the humor and english skills needed to endure this pain.
So let’s go.
Naked Shorting exists, and it exists to levels that require Government bail-out programs (the grandfather clause) and cover-up (lack of Congressional Hearings). Your Federal representatives are trying to put all your pain into a manila folder and file it. Pretend that the issue is no longer an issue. SHO is Law.
In 2003 the SEC identified that settlement failures can be abusive in nature and are used as additional leverage to manipulate stock pricing. That was the Department of Market Regulation's background statement when proposing Regulation SHO. While the SEC identified the potential for fraud, they released a rule that not only violated Congressional Laws, but also violated their own identified opportunity to thwart manipulation. The SEC ignored their responsibility to address the very issue they had been forced to admit not only existed, but existed in a big way.
So what do we do about it?
For the past several years, we biatched. We complained about the problem but failed to present a plausible solution, en mass, and in demand. We allowed Regulators and Congress to deflect our attentions into blaming others, and thus allowed them to delay affecting a solution. We got sidetracked, and now we are creeping up on a point where the statue of limitations will forever put restitution out of reach.
As the latest and most supportive personal sponsor of our cause stated, “My Bad.” Take responsibility!!! I will not name the individual as it is not relevant. It is the message that counts.
Take responsibility!
So Lets Start Solving. My first Blog will be to ask for your answers, and not your problems.
A PUBLIC TEAM MEETING! Let our detractors exploit this. An open discussion looking for a proposed solution.
I will start the process of solution creation by presenting mine. It is something I have proposed to the SEC and to State Regulators. We need to focus on reality of the situation while placing the rights of investors over the rights of criminals. The fraud has been decades - the solution cannot be hours.
My solution to this problem is as follows:
Settlement failures exist for many reasons and presently exist on the books for indefinite periods in time. This is inexcusable and illegal. We must therefore gracefully eliminate all prior and grandfathered fails in the system without causing systemic collapse.
Step 1. Define the conditions of settlement on closeouts. Settlement must mean delivery of shares and not passage of yet another fail. Today the members of the market use one fail to offset another as a means of diversion. This tactic must be eliminated as it creates excessive and continuous market liabilities. The very liabilities that created this problem.
Step 2. Create a process that gradually eliminates the aged fails. Start with a fail greater than 100 days and allow for no longer than 10 days to close out all fails that exceed 100 trading days. There will be zero exemptions as there are no legal grounds for a fail to exist for this duration of time. NONE!
Step 3. After a 5-day delay, repeat the process for all fails that exceed 50 days. And so on until the fails are reduced to no greater than 10 days.
Step 4. Have laws in place that allow for a maximum fail duration of 10 days without qualified reasons, cost never being accepted as a qualifier. The NASD proposed this in March of 2004 and the SEC never responded publicly as to why this could not be accomplished. This proposal is rational and in direct compliance with the Securities Act handed down by Congress. If the SEC has a rational reason for not complying with such a law they should be forced to publicly present arguments as to why they feel they have authority to violate Congressional Acts.
Step 5. Create a standardized penalty system for abusers of the settlement system, including both Wall Street firms and Executives. The SEC just set standard rules on fines. Set a similar standard on repeat Wall Street violations. Fraud deterrent to Wall Street management can only be public embarrassment and personal financial accountability. The penalty system would start with fines and lead to suspensions, and ultimately disbarring.
Step 6. Create laws within the DTCC to limit any and all stock loans, orchestrated through the DTCC stock loan system, to a maximum duration of 10 days. The DTCC stock loan program was created as a temporary measure to resolve temporary and unexpected fails and thus that temporary status must be firmly defined. Wall Street will abuse ambiguities and thus we must eliminate them. At the conclusion of the term of the loan, the DTCC must force a mandatory buy-in with no exceptions. The use of additional borrowed shares to fulfill such obligations shall be firmly restricted as it will create a process of strategic cost delays.
My steps do not include the fine details behind these steps for space reasons, but provide for a skeleton of what the system could and should look like, IMO.
The Regulators claim a lack of resources to evaluate all fraud yet in many cases the resources are used trying to figure out whether or not an illegal act has been committed because the details, as a stand-alone, can have ambiguity to them. The process is resource-wasteful. If the laws become less ambiguous it would reduce the workload, reduce fraud, and expedite the enforcement.
Guys, I welcome all comments and recommendations of completely differing ideas. This is a public working session.
Unlike the lack of public exposure the SEC provides in their processes, favoring secret Wall Street meeting with meeting minutes undisclosed, we can show how the affected people really think. We can show professionalism and creativity that exceeds something as lazily considered, benign and irresponsible as a “Grandfather Clause.”
We are not the “Cottage People” Cramer makes us out to be, but instead realists and creative thinkers. We are the professionals willing to not only identify a problem, but provide a solution.
In closing, I urge you to write to your Congressman, State Rep, and Federal regulators and let them know about this site. They too can learn something about how people can come together for solutions when politics and conflicts of interest are taken out of the equation. Show them a solution and ask them why they can’t understand the hurt.
Bob O’Brien, thank you for your efforts and for your creative ingenuity in creating this Team forum.
To the team, you people, I look forward to reading, and responding to all of your comments – across the blogs – and hope that you can not only maintain the integrity and creativity demonstrated in the past but can also bring awareness to each of your Congressman of this problem. We are the ‘minority’ here and thus our character must stand above all others for us to be trusted and believed.
So….Please do not just biatch - provide solutions. Prove as ‘minorities in the Wall Street social structure that you have the intelligence and ethics needed to solve a problem which has long been denied. You only need the support.
I can’t wait to hear your solutions.
Dave Patch
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Re: No Longer Just biatch; Let’s Solve By bobo on 1/6/2006 10:41 PM
Welcome Dave. I've followed your erudite commentary at InvestigatetheSEC.com for years, and can't tell you how happy I am that you have decided to join this site as a contributing blogger.
For those that haven't been following this saga, Dave was recently on CNBC's Ron Insana show to offer commentary on the naked short selling crisis.
I will work on my own solutions this weekend to add to your blog, but wanted to stop in and say thanks for the years of effort that you have invested in market reform, and I hope that you find time to put new blogs in on a regular basis - I always enjoy reading your work.
--------------------------------------------------------------------------------
Re: No Longer Just biatch; Let’s Solve By adegracia1950 on 1/7/2006 4:22 AM
Dave,
I would like to support the effort in bringing this issue to public light. I am one of many small investors who just want a fair process in the buying and selling of stocks. I do not claim to know all there is to know about this problem but I am learning real fast from you and the rest of the champions to fix this problem.
I feel that the first step for guys like me in solving the issue is to communicate my concern to my government reps, the attorney general of my stae, the sec and other government reps who can effect change. My problem is "Where and how to start".
Could you provide a recommendation of who to communicate to first, what to say, what to reference and type of communication methodology to use to be most effective.
I feel that if the people in charge started seeing an organized complaint format it may help get there attention, not to mention make it easier for people to get off the sidelines and get involved.
Thanks
Alan
-------------------------------http://www.thesanitycheck.com/Blogs/DavePatchsBlog/tabid/66/EntryID/2/Default.aspx
Location: BlogsDave Patch's Blog
Posted by: Dave Patch 1/6/2006 9:44 PM
Welcome all.
Bob O’Brien had the awareness to put the efforts of all our separate mediums together into one, and it was the best move we, the TEAM, ever could have had. You are all part of that Team and essential to success. We now can speak as a united front, together, and solve a problem that has persisted for decades and has destroyed not only our present personal financial futures but also the futures of generations to come, if this problem is not corrected. Today, the bloggers listed are those willing to step out and take control - tomorrow you too may carry that torch.
Thank You Easter Bunny.
Okay, Down to Brass Tacks. I am an engineer, more analytical than an eloquent speaker. Hell, I am an Engineer -English is a foreign language so pardon all my screwups. But I am also a detailed person that wants to dig into legal guidelines and solve our collective problem. My blogs will be less satirical and more calculating. For those seeking amusement with their sermon, go to Bob and Mark’s blogs. They have the humor and english skills needed to endure this pain.
So let’s go.
Naked Shorting exists, and it exists to levels that require Government bail-out programs (the grandfather clause) and cover-up (lack of Congressional Hearings). Your Federal representatives are trying to put all your pain into a manila folder and file it. Pretend that the issue is no longer an issue. SHO is Law.
In 2003 the SEC identified that settlement failures can be abusive in nature and are used as additional leverage to manipulate stock pricing. That was the Department of Market Regulation's background statement when proposing Regulation SHO. While the SEC identified the potential for fraud, they released a rule that not only violated Congressional Laws, but also violated their own identified opportunity to thwart manipulation. The SEC ignored their responsibility to address the very issue they had been forced to admit not only existed, but existed in a big way.
So what do we do about it?
For the past several years, we biatched. We complained about the problem but failed to present a plausible solution, en mass, and in demand. We allowed Regulators and Congress to deflect our attentions into blaming others, and thus allowed them to delay affecting a solution. We got sidetracked, and now we are creeping up on a point where the statue of limitations will forever put restitution out of reach.
As the latest and most supportive personal sponsor of our cause stated, “My Bad.” Take responsibility!!! I will not name the individual as it is not relevant. It is the message that counts.
Take responsibility!
So Lets Start Solving. My first Blog will be to ask for your answers, and not your problems.
A PUBLIC TEAM MEETING! Let our detractors exploit this. An open discussion looking for a proposed solution.
I will start the process of solution creation by presenting mine. It is something I have proposed to the SEC and to State Regulators. We need to focus on reality of the situation while placing the rights of investors over the rights of criminals. The fraud has been decades - the solution cannot be hours.
My solution to this problem is as follows:
Settlement failures exist for many reasons and presently exist on the books for indefinite periods in time. This is inexcusable and illegal. We must therefore gracefully eliminate all prior and grandfathered fails in the system without causing systemic collapse.
Step 1. Define the conditions of settlement on closeouts. Settlement must mean delivery of shares and not passage of yet another fail. Today the members of the market use one fail to offset another as a means of diversion. This tactic must be eliminated as it creates excessive and continuous market liabilities. The very liabilities that created this problem.
Step 2. Create a process that gradually eliminates the aged fails. Start with a fail greater than 100 days and allow for no longer than 10 days to close out all fails that exceed 100 trading days. There will be zero exemptions as there are no legal grounds for a fail to exist for this duration of time. NONE!
Step 3. After a 5-day delay, repeat the process for all fails that exceed 50 days. And so on until the fails are reduced to no greater than 10 days.
Step 4. Have laws in place that allow for a maximum fail duration of 10 days without qualified reasons, cost never being accepted as a qualifier. The NASD proposed this in March of 2004 and the SEC never responded publicly as to why this could not be accomplished. This proposal is rational and in direct compliance with the Securities Act handed down by Congress. If the SEC has a rational reason for not complying with such a law they should be forced to publicly present arguments as to why they feel they have authority to violate Congressional Acts.
Step 5. Create a standardized penalty system for abusers of the settlement system, including both Wall Street firms and Executives. The SEC just set standard rules on fines. Set a similar standard on repeat Wall Street violations. Fraud deterrent to Wall Street management can only be public embarrassment and personal financial accountability. The penalty system would start with fines and lead to suspensions, and ultimately disbarring.
Step 6. Create laws within the DTCC to limit any and all stock loans, orchestrated through the DTCC stock loan system, to a maximum duration of 10 days. The DTCC stock loan program was created as a temporary measure to resolve temporary and unexpected fails and thus that temporary status must be firmly defined. Wall Street will abuse ambiguities and thus we must eliminate them. At the conclusion of the term of the loan, the DTCC must force a mandatory buy-in with no exceptions. The use of additional borrowed shares to fulfill such obligations shall be firmly restricted as it will create a process of strategic cost delays.
My steps do not include the fine details behind these steps for space reasons, but provide for a skeleton of what the system could and should look like, IMO.
The Regulators claim a lack of resources to evaluate all fraud yet in many cases the resources are used trying to figure out whether or not an illegal act has been committed because the details, as a stand-alone, can have ambiguity to them. The process is resource-wasteful. If the laws become less ambiguous it would reduce the workload, reduce fraud, and expedite the enforcement.
Guys, I welcome all comments and recommendations of completely differing ideas. This is a public working session.
Unlike the lack of public exposure the SEC provides in their processes, favoring secret Wall Street meeting with meeting minutes undisclosed, we can show how the affected people really think. We can show professionalism and creativity that exceeds something as lazily considered, benign and irresponsible as a “Grandfather Clause.”
We are not the “Cottage People” Cramer makes us out to be, but instead realists and creative thinkers. We are the professionals willing to not only identify a problem, but provide a solution.
In closing, I urge you to write to your Congressman, State Rep, and Federal regulators and let them know about this site. They too can learn something about how people can come together for solutions when politics and conflicts of interest are taken out of the equation. Show them a solution and ask them why they can’t understand the hurt.
Bob O’Brien, thank you for your efforts and for your creative ingenuity in creating this Team forum.
To the team, you people, I look forward to reading, and responding to all of your comments – across the blogs – and hope that you can not only maintain the integrity and creativity demonstrated in the past but can also bring awareness to each of your Congressman of this problem. We are the ‘minority’ here and thus our character must stand above all others for us to be trusted and believed.
So….Please do not just biatch - provide solutions. Prove as ‘minorities in the Wall Street social structure that you have the intelligence and ethics needed to solve a problem which has long been denied. You only need the support.
I can’t wait to hear your solutions.
Dave Patch
Permalink | Trackback
--------------------------------------------------------------------------------
Comments (2) Add Comment
--------------------------------------------------------------------------------
Re: No Longer Just biatch; Let’s Solve By bobo on 1/6/2006 10:41 PM
Welcome Dave. I've followed your erudite commentary at InvestigatetheSEC.com for years, and can't tell you how happy I am that you have decided to join this site as a contributing blogger.
For those that haven't been following this saga, Dave was recently on CNBC's Ron Insana show to offer commentary on the naked short selling crisis.
I will work on my own solutions this weekend to add to your blog, but wanted to stop in and say thanks for the years of effort that you have invested in market reform, and I hope that you find time to put new blogs in on a regular basis - I always enjoy reading your work.
--------------------------------------------------------------------------------
Re: No Longer Just biatch; Let’s Solve By adegracia1950 on 1/7/2006 4:22 AM
Dave,
I would like to support the effort in bringing this issue to public light. I am one of many small investors who just want a fair process in the buying and selling of stocks. I do not claim to know all there is to know about this problem but I am learning real fast from you and the rest of the champions to fix this problem.
I feel that the first step for guys like me in solving the issue is to communicate my concern to my government reps, the attorney general of my stae, the sec and other government reps who can effect change. My problem is "Where and how to start".
Could you provide a recommendation of who to communicate to first, what to say, what to reference and type of communication methodology to use to be most effective.
I feel that if the people in charge started seeing an organized complaint format it may help get there attention, not to mention make it easier for people to get off the sidelines and get involved.
Thanks
Alan
-------------------------------http://www.thesanitycheck.com/Blogs/DavePatchsBlog/tabid/66/EntryID/2/Default.aspx