February 19, 2010
Short-selling of uncovered (unborrowed) positions should be illegal in all circumstances in my opinion. Uncovered short-selling allows short traders to essentially issue shares of the target company and dilute existing shareholders without restraint.
Traders who wish to establish a short position without a borrowing requirement have the option market available to them.
The SEC requires listed firms to report their quarterly and annual results on a fully diluted basis. Why then would the SEC also allow unlimited dilution of listed companies in the marketplace?
I've never had a single trader, hedge funder or advisor be able to logically refute this argument because they simply cannot do it. It is just logical mathematically and a plain decision of right from wrong that gets them every time. Actual investors need to be protected from abuse of short-selling.
Thank you for the opportunity to comment on this important topic.