Post by kranker on Sept 22, 2006 23:52:35 GMT -4
Q&A Session complete. Answers begin on page 3
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Bob O'Brien (aka bobo) has graciously accepted our invitation to do a Q&A on the subject of naked short selling. He will be taking and responding to questions live and pre-submitted by members.
You have witnessed him stand shoulder to shoulder with Patrick Byrne to take on the deviants of Wall Street and corrupt political figures and officials.
Please post your questions to this thread now, and/or submit your questions live at 9PM EST.
Please Note: Bob O'Brien is not a self-proclaimed CMKX Guru. If you ask him about CMKX; he may not be able to answer your question to the extent you would like, or at all.
Reference material,
Bob O'Brien's Sanity Check Blog
www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/Default.aspx
An Introduction to Naked Short Selling by Bob O' Brien
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Bob O'Brien (aka bobo) has graciously accepted our invitation to do a Q&A on the subject of naked short selling. He will be taking and responding to questions live and pre-submitted by members.
You have witnessed him stand shoulder to shoulder with Patrick Byrne to take on the deviants of Wall Street and corrupt political figures and officials.
Please post your questions to this thread now, and/or submit your questions live at 9PM EST.
Please Note: Bob O'Brien is not a self-proclaimed CMKX Guru. If you ask him about CMKX; he may not be able to answer your question to the extent you would like, or at all.
Reference material,
Bob O'Brien's Sanity Check Blog
www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/Default.aspx
An Introduction to Naked Short Selling by Bob O' Brien
Naked short selling is the practice of creating sales transactions, taking investor money, and then failing to deliver the stock.It is possible because the way the clearing agency, which is a for profit entity owned by the brokers and banks, clears trades, is to process the transaction first, and then worry about delivery later. This is the antithesis of how Congress instructed the SEC to handle trades in Section 17A, but like it or not, that is how it now works. So a sales transaction is printed, and three days later, everyone waits to see if a share shows up. If it doesn't, a failure to deliver is created – an FTD. Without getting too technical, and FTD is an IOU for a share that fails to be delivered. The mechanism the brokers use to credit client accounts with stock is called a security entitlement. That is what they put in your account while they wait for the shares to show up. For short, I call security entitlements SEs. SEs sit in your account, and at T+3 – three days after the transaction – shares are delivered, and the SE is a bona fide marker for the share now in your broker's name in the vault of the DTC. If no share shows up, the problem with the current system is that the broker still keeps the SE in place, making you believe that the transaction settled – but no share showed up, thus the SE is basically bogus. That's how you can have all these "shares" out there, but be unable to get certificates. The brokers credited customer accounts with all these SEs, but no shares ever showed up to make them legit, and the brokers didn't cancel the trades and return your money. Instead, they figured you'd never know the difference, so they just kept them in place, along with keeping your money. When you demand a certificate, you are essentially demanding the share the SE should have in place to make it a legit SE. Naked short selling is fairly complex in terms of how it can work. A hedge fund places a sell order, and his broker puts the trade through without requiring confirmation that he has shares to sell. That is against the rules, but it happens constantly. Next, you buy those "shares", and at T+3 he fails to deliver them to the clearing house. Your broker, who could well be the same as the hedge fund's broker, doesn't tell you that it is a failure, but instead acts as though all is well. It's really just misrepresentation and fraud at that point, but an entire industry spends many millions every year to make it seem like those terms are too harsh. And the SEC plays along. So that is where we are now. Nobody knows how much of the total trading is in bogus trades that lack stock to back them – that is a big secret. But what I am fighting for, along with all the members of NCANS and the contributors to TheSanityCheck.com, is to educate investors and the public as to the magnitude of the scam, as well as to the mechanics. Put simply, many billions are made screwing investors using this technique, and Wall Street has invested a lot of time and effort into making it all seem too difficult for anyone to understand. That's a load of bull. It's easy. Brokers are taking your money, telling you that the trade settled, and not delivering what you paid for – and they figure most are too stupid or lazy to call them on it. |