Thursday, July 28, 2005

Captive Regulator Chooses To Protect Criminals


You read it right.

Our securities regulator is now on record, indicating that they chose sides when they created Regulation SHO, and the side they chose was protecting the naked short sellers, rather than the investing public.

You can see this admission memorialized at this site.

In the document, you will find them admitting clearly that they were concerned about creating short squeezes, thereby causing the naked short sellers financial pain associated with covering their illegally sold shares. They obviously had no concerns about the financial damage that the short sellers caused to the investors when they sold those naked shares into the market, often in very rapid and systematic fashion, to deliberately depress stock prices. That is OK in the SEC's book, even though there are laws against doing so. But should the short sellers actually have to cover their illegally sold shares in the same fashion, resulting in a run back up to fair value, that would cause them financial pain - and the SEC doesn't want to cause the short sellers pain.

Read it.

Now, what do you do with that? How do you reconcile someone like Annette Nazareth being made an SEC Chairperson, merely months after saying that there wasn't any problem, and further that investors were just a big bunch of crybabies because their stocks hadn't gone up? And now we see, in writing, that the SEC is in on it, ensuring that the short sellers are protected from the consequences of covering their fails in a timely manner? What can be said about that? How can the SEC take the stance one week that there was no problem of significance, and then confirm in writing that the problem was significant enough to cause short squeezes of the magnitude to cause them to have to allow the rules to continue to be broken for many months in order to avoid squeezes?

Who is hurt by a short squeeze, other than the short sellers who created the situation in the first place? Nobody. But the SEC wants to protect them from the natural consequence of building up a huge inventory of illegally shorted stock, while doing nothing to protect the investors who were harmed by their downward manipulation using these illegally shorted shares.

What do you do when your police force is protecting the bank robbers, and slapping the cuffs on anyone with the temerity to point out their corruption?

I am sickened, but not surprised. Folks, the system is broken, and this document confirms just how badly. When your regulator chooses to protect the violators at the expense of the folks they fleeced, we have a problem.

And Bush wants us to put our SS money into this market? Why not just mail our checks directly to the hedge funds and eliminate the formality of the market?

This stinks, and nobody in Washington wants to tackle it.


Blogger klipediaman said...

Ok, the way I see it, the SEC did not want to force a short squeeze "quickly". Don't know that is fair, but OK. It also states they are monitoring grandfathered fails to see if they are being closed out in due course.

So how much time do "they" need? With the SEC in charge, it will be probably 10 years unless it becomes a big political issue. With NFI floating in and out of SHO, makes me wonder if someone is trying to play under the radar or the DTCC's accounting is FUBAR.

7:26 PM  
Blogger pmhj said...

kick butt buddy keep at it

1:51 PM  

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