Friday, May 20, 2005

Why Does the NSCC Want A Get Out Of Jail Free Card?

Wonder why that is? Per the latest "rule" that the NSCC passed and which the SEC rubber stamped, the NSCC is shielded from damages arising from their violating Federal Securities Laws, or at least has limited its liability. I'm not making this up. At least that is what they'd like to have you believe. The fact is that the SEC doesn't have the right to grant to the NSCC/DTCC, a private company, the right to willfully break the law and not have any consequences. Just doesn't. The only ones that could do that are Congress. And the SEC isn't Congress. It is an agency created by Congress.

A good question is why the NSCC feels the need to pass a rule essentially saying that they have limited liability for willful misconduct and violating securities laws. Why would they need to have that on the books, do you think? Is it because they know that they have been willfully violating securities laws for years, know that it will come out in court, and want to have a piece of paper to fall back on? That's the only explanation I can come up with. And frankly, it corroberates the theory that the stock borrow program violates a host of securities laws, that the NSCC knows it, and that they have been counterfeiting stock for years and just now are starting to catch on to the idea that they will get caught. It would appear that the rats are beginning to look for ways to jump ship, and are jockeying for ways to protect themselves.

It sucks.

Go see the rule at www.nscc.com/impnot/notices/notice2005/a6029.pdf - and wonder at the hubris.

4 Comments:

Blogger Cutty said...

I think you should read the SEC comment at :http://www.sec.gov/rules/sro/nscc/34-51458.pdf
From what I understand, the idea is to limit liability UNLESS there was willfull misconduct or breaking the law, not if.
But it is true that the wording in the NSCC notice is quite ambiguous.
Or is it a wrong interpretation from my part?

3:03 AM  
Blogger Jer. 9:24 said...

The post above is correct as far as I can tell. And I have to assume that this "rule" will only apply with respect to claims made against DTCC/NSCC by DTCC's "participants", i.e., the brokers who use the corrupt NSCC stock "borrow" program to cover settlement failures.

No judge who is smart enough to have actually graduated from a U.S. law school is going to honor a DTCC (i.e., privately owned entity) "rule" granting itself immunity from or limitations on liability for its actions with respect to claims made by non-participants (that is, third parties). However, as a contractual matter between itself and each of its participants it probably will fly, with respect to claims based on actions of DTCC after the rule became effective.

So I think this move was an attempt by DTCC to shield itself from the eventual lawsuits by brokers and clearing firms (or the trustees in their bankruptcy actions) that get stung by forced covers of their settlement failures--the settlement failures they allowed to fester behind the stock "borrow" program for extended periods, rather than cover them as federal law, their industry regulations and their fiduciary responsibilities to their customers requires.

Several brokers tried to turn on and point the finger at DTCC when they were recently sued for refusing to deliver shares to customers, shares they could not deliver because they had never settled the trades. They said "DTCC let us do it, it's their fault."

It should not surprise anyone that the SEC meekly grants DTCC's every demand, they have been doing it for years. SEC is afraid to offend --and is desperate to protect-- its industry masters, DTCC being the biggest. The good news is, this action indicates DTCC knows it is in deep trouble.

8:20 AM  
Blogger majordanger said...

While the clearinghouse boys are quietly packing parachutes and getting ready to clear out(Thanks in part to NBC Dateline who also happens to own Newsweek), The SEC and the IRS are responding to the investors with a big blank silent stare.

Kinda reminds me of when departing President Eisenhower warned of "an immense military establishment and a large arms industry"

This gag ain't gonna go down pretty.

Bob, you just keep shining lights in the rat corners and I'll keep writing emails, letters and fowarding links TO WHOM IT SHOULD CONCERN and possibly one day a real chink in the armour will appear.

4:59 PM  
Blogger bob obrien said...

The Eisenhower thing is apropo. Few probably remember that he cautioned against a military industrial complex whose power usurped the rights fo the citizenry. That included and in fact hinged upon the idea of a government working for that complex, rather than its citizenry.

I think he saw this coming.

Can't way we weren't warned.

6:46 PM  

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