Oct. 2, 2022
October 2, 2022 I thank you for this opportunity to offer comments and suggestions regarding the Proposed Rule under file no. S7-08-22: Short Position and Short Activity Reporting by Institutional Investment Managers. Q5. Reporting Thresholds: Managers avoid triggering the proposed Reporting Thresholds. In light of the recent SEC charges of Archegos's executives for misleading Counterparties and by the Department of Justice, charging the Founder and Head of Archegos, and three other executives with racketeering and fraud offenses related to a market manipulation scheme publicly released on April 27, 2022, the SEC currently possess on hand direct evidence of a market participant distorting and defrauding the financial market. Document #38 of the Case: United States v. Sung Kook (Bill) HWANG, et al. (1:22-cr-00240-AKH), District Court, Southern District. New York, precisely and sensibly depicts the reasoning behind my prior concerns within the SEC comment that I have previously submitted and got published on March 15, 2022. For instance, in Indictment 52, Paragraphs 52(a) through 52(c) allege several misrepresentations of Archegos's concentration of their portfolio and false claims to representatives of Credit Suisse, UBS, Mitsubishi UFJ Financial Group, Goldman Sachs, Nomura, Deutsche Bank, Macquarie, BMO, and Mizuho. In Indictment 55, Paragraphs 55 through 59 contain detailed allegations about the Conspirators' efforts to mislead Counterparties about Archegos's portfolio. Indictment 59 alleges that Hwang signed documents certifying that \"its exposure to individual positions was below particular thresholds\" when the truth was otherwise. Notably, Paragraph 59(a) alleges that \"On or about December 15, 2020, HWANG signed an ISDA agreement with Credit Suisse\" that \"contained a provision representing that Archegos beneficially owned less than 20% of the outstanding shares of any issuer's stock, including both cash and swap positions.\" Paragraph 59(b) alleges that \"HALLIGAN signed swap transaction confirmations with MUFG, representing that Archegos's stock and derivative positions together represented less than 5% of the outstanding shares of the issuer's stock.\" I would like to reiterate and expand on my statements contained in my previous comment over a month prior to the jointly released press by the SEC and the Department of Justice on April 27, 2022. How can we have absolute confidence given this recent case, that the information that would be reported under the Proposed Rule by Managers would be undoubtedly accurate? Given that the information required is self-reported, those who are unwilling to unveil their short-selling strategy will find any way not to disclose that information accurately. Evidently, Archegos Conspirators simply lied. What would restrict Managers to not make false disclosures and not accurately reporting past the Reporting Threshold? Who would provide accountability if the Commission \"does not intend to verify the accuracy of the data reported by Managers, but may consider doing so in the future after assessing whether such verification would be useful or necessary to enhance the integrity of the data.\"? Is it a requirement that market participants ought to default on margin calls from several global investment banks for the Commission to start conducting investigations and assessing the risks that they have put themselves into through total return swaps? How about preventing these events by collecting data on derivatives positions on underlying equity securities while verifying the integrity of the data? Unfortunately, it appears to me that there are not enough preventive measures enacted, which should be the utmost priority for the SEC considering the three pillars: Investor Protection, Capital Formation, and Market Integrity, and therefore will allow the pervasive cycle of Wall Street fleecing on Main Street investors for several years or even decades, and the surge of the next financial crisis to continue. How many additional years or decades do retail investors have to be fleeced through market manipulation and fraud by nefarious market participants? Disgorgement and fines are, again, not enough to relinquish their will to violate the rules and profit off existing loopholes. Moreover, the \"cost of business\" stance reflected within the financial industry needed to cease from the outset. To this end, I firmly believe the SEC must pursue and collaborate with the Department of Justice to criminally charge those in command of these crimes. I hope and highly urge the Commission to reconsider its position on the usefulness and necessity of verifying data. It is imperative to establish the necessary steps to ensure the accuracy of the data being self-reported by Managers and any other market participant. Otherwise, the trust and confidence in a fair market from retail investors will persist in declining. Finally, I want to express my support for the Proposed Rule and advocate for additional safeguards such as collecting derivative positions of Managers and any other market participant. And the verification of data for market integrity.