April 26, 2007
The current loopholes found within Reg SHO and the lack of enforcement of its parameters is nothing more than theft. If sellers fail to deliver, they need to receive a margin call and pay for their shares. Failure to deliver (FTD) or purchase shares in the open market to deliver is nothing more than counterfeiting shares. There are companies appearing in the Reg SHO list for upwards of 400+ days. Who profits from these counterfeited shares? Obviously not the retail investor, as dilution affects them primarily. It is quite apparent that the SEC does not care about retail investors who provide funding for the public companies that comprise our markets. Since it is so apparent that the SEC is incapable of regulating the market or itself in regards to Reg SHO it is time all loopholes are closed: eliminate the grandfather provision and narrow the market maker exception. Require delivery of shares.
As a licensed broker I find myself defending my profession to both family and friends due to the actions of those failing to deliver and the SEC's inaction in response to those individuals illegal activities. The fiduciary responsibility I have to clients was one which was drilled into while preparing for my licensing, and every year through continued education. What about the SEC's fiduciary responsibility to those same investors?