August 1, 2008
Although naked shorting and failure to deliver activities are immoral, fraudulent, and illegal, they have been going on for many years. The SEC has failed to prosecute those violating these laws. The SEC makes lists of companies where naked shorting may exist. This is not enough. Paper trails of naked shorting transactions on US exchanges are available. Why are these criminals not being prosecuted? Now the SEC is asking if the laws against naked shorting should be enforced when the victims are on a list of special large financial institutions. The clear answer is Yes, enforce existing laws and prosecute naked shorting criminals whether the victims are large multinational corporations or just small companies.
By not enforcing existing securities laws on US stock exchanges, the SEC is hastening the loss of Americas top position in world capital markets. Naked shorting is like counterfeiting company shares and then selling them through the stock exchanges. The worst part of naked shorting is that in many cases, the fraudsters do not buy back the counterfeit shares so the companys share prices remain artificially depressed--never recovering. The fraudsters are then able to buy the company for pennies on the dollar. Countless small companies have been pushed into bankruptcy by criminals who have sold short more shares than are available to be borrowed. The SEC is to blame for thousands of jobs destroyed when companies harmed by naked shorting were bankrupted because they could not obtain financing for operations or expansion. And the SEC is also responsible for thousands of innovative goods and services that could not be brought to market because the companies producing these goods and services no longer exist. Why should companies pay top dollar to list their shares on US exchanges if they are not going to be protected from criminals who can use naked shorting to force these companies into bankruptcy. Naked shorting is very bad for the economy and the SEC can and must stop it.
We the citizens and taxpayers of the US demand that the SEC enforce existing laws as it has been generously funded to do. It is the right thing to do. It must be done immediately to prevent more jobs, companies, innovation, and economic growth from being permanently lost.
Ajay B. Gajjar, CPA, CFM, CMA, CIA, CGFO