July 17, 2008
Dear SEC,
I see your press release dated July 15, 2008, which contains your emergency order entitled "SEC Enhances Investor Protections Against Naked Short Selling" (http://www.sec.gov/news/press/2008/2008-143.htm), seeks:
"to enhance investor protections against "naked" short selling in the securities of Fannie Mae, Freddie Mac, and primary dealers at commercial and investment banks."
Your press release further explains that your emergency order, which took effect last Monday, July 21, 2008 at 12:01 a.m., seeks to protect only the stocks of two Quasi-Governmental Companies, Freddi Mac and Fannie Mae, and 17 additional publicly traded stocks of commercial and investment banks against "naked" short selling:
"The SEC's order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21."
Immediately following these sentences quoted just above is the following statement:
"In addition to this emergency order, the SEC will undertake a rulemaking to address these issues across the entire market."
What do you mean "the SEC will undertake a rulemaking to address these issues across the entire market?"
You, the SEC, has been undertaking rulemaking to address "naked" short selling, which is more accuratelly described as the illegal "counterfeiting of publicly traded stocks" for many years now.
And because the "baby step" rules you enacted during the last several years have NOT Stopped the "counterfeiting of publicly traded stocks", you were forced to put in place your recent emergency rule:
"The SEC's order will require that anyone effecting a short sale in these securities Fannie Mae, Freddie Mac + 17 others arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21."
Everyone understands the United States Government does NOT allow any person to counterfeit it currency. The law is plain and simple - Any person caught counterfeiting U.S. currency will be tried convicted, and punished. And this law does not favor any economic class of individuals, since the law is totally blind to economic class.
In spite of your "foot dragging" over the last several years to stop "naked" short selling, which is the actual illegal "counterfeiting of publicly traded stocks", I applaud your recent emergency order governing short sales of securities:
"The SEC's order will require that anyone effecting a short sale in these securities Fannie Mae, Freddie Mac + 17 others arrange beforehand to borrow the securities and deliver them at settlement."
This order is plain and simple.... if you want to short the stock of a company, you MUST arrange to borrow the securities BEFORE executing a short sale, and you MUST DELIVER the share at settlement.
Although this emergency order is a good start, and I very much welcome it, I see two problem with it:
1. I Do NOT see in your press release any indication that there is a punishment for failing to follow this rule.
- So Is there a punishment? And if there is, what is it?
2. This emergency order ONLY covers 19 publicly traded companies, two of which are quasi-governmental companies, which means that this order leaves the vast majority of publicly traded stocks UNPROTECTED from the "Unlawful Manipulation of company stocks through 'naked' short selling".
The solution to this second problem is quite simple, since you have already formulated it. The simple solution should state:
"The SEC's order will require that anyone effecting a short sale in "all" securities arrange beforehand to borrow the securities and deliver them at settlement."
Making this the plain and simple law for securities of ALL publicly traded companies makes it crystal clear that illegal "counterfeiting of publicly traded stock," also called "naked" short selling, will not longer be tolerated. Doing this also means the SEC will adopt the same "common sense" law the U.S. Government has in regard to counterfeiting its currency (as long as there is a punishment for failure to deliver).
It seems to me that if you do NOT extend your emergency order to "ALL" securities, your order will be seen as governmental favoritism for the rich and powerful, since these are the only people who can participate in the illegal "counterfeiting of publicly traded stock," "naked" short selling.
So I strongly urge you, the SEC, to Stop "dragging your feet," Stop taking "baby steps," Stop your ongoing multi-year rulemaking process, and Stop favoring the rich and the powerful by simple making the counterfeiting of ALL publicly traded securities ILLEGAL, just as the U.S. Government makes ALL counterfeiting of its currency ILLEGAL. All you have to do is extend your recent order to All securities with the following:
"The Securities and Exchange Commission today issued an emergency order to enhance investor protections against "naked" short selling in the securities of ALL publicly traded stocks."
"The SEC's order requires that anyone effecting a short sale in "all" securities arrange beforehand to borrow the securities and deliver them at settlement."
"Failure to deliver at settlement is a crime of counterfeiting and will be punished by..."
Sincerely,
Stephen Burleigh