SEC - Proposed new rule on Naked Short Selling

[Brian4Liberty]

Interesting in that they pretty much admit that this is already fraud, but they are "proposing" an additional specific rule on naked short selling. Seems like saying, "well murder is already illegal, but specifically, murder by sticking an ice-pick in someone's ear is also illegal".


http://www.sec.gov/rules/proposed/2008/34-57511.pdf

Although abusive “naked" short selling as part of a manipulative scheme is always illegal under the general anti-fraud provisions of the federal securities laws, including Rule 10b-5 under the Exchange Act,3 proposed Rule 10b-21 would highlight the specific liability of persons that deceive specified persons about their intention or ability to deliver securities in time for settlement, including persons that deceive their broker-dealer about their locate source or ownership of shares.4 We believe that a rule highlighting the illegality of these activities would focus the attention of market participants on such activities. The proposed rule would also highlight that the Commission believes such deceptive activities are detrimental to the markets and would provide a measure of predictability for market participants."

Comments on this rule:

http://www.sec.gov/comments/s7-08-08/s70808.shtml

 

[Dr.3D]

Isn't it something they have let people get away with doing this for so long?
Reminds me of the ability to violate the constitution of the United States and getting away with it.

There should always be consequences for violation of the rules. If there are no consequences, then people will just keep on doing what they have been doing and getting away with it.

 

[rapidtrends]

Problem is the brokers know how to work the system better than the SEC knows how to police the system.

We dont need more laws, we need better enforcement.

Best audio I have ever heard in regards to understanding shorting and how market manipulation works, they even have a broker on there "confessing" to how they do it: http://netcastdaily.com/broadcast/fsn2008-0621-3b.mp3

 

[scooter]

They aren't saying that there is technically anything wrong with nake short selling. They are saying that it is wrong to execute this strategy with no intention or ability of delivering the securities after the 3-day holding period. They are concerned about fraud, where brokers or traders misrepresent their financial standing in order to execute a transaction that they can't fulfill.

What the SEC really needs to fix is the uptick rule. Once they got rid of that, shorts have nothing standing in the way of knocking down a stock for profit.