U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

The following comment on Letter Type A,
or variations thereof, was submitted by
19 individuals or entities on S7-23-03.

Letter Type A:

SEC Proposal (SHO)



  1. All sales (Short or Long) should have a specified time limit for trade settlement. Typical is T+3. One cycle of Buy-In should be afforded beyond that but that is it. Any Settlement Failures that result in a failure beyond 10 Business days should result in a Fine to the selling Firm.

  2. All settlement failures (Short or Long Trades) that extend beyond 10 business days should result in a $1000 fine to both the Buyers and Sellers Brokerage firm. The Brokerage firms need an incentive to police each other.

  3. If, in the event of a short sale, the share cannot be borrowed for delivery after T+5 the selling broker shall relinquish their rights to a commission. For each trade above a qty of 3 executed that exceed T+5 on a specific security the Broker will be fined an additional $1000/trade.

  4. A short seller should be restricted to holding that short position for no longer than 90 Calendar Days to maintain liquidity in available short positions. All Borrowed Short shares shall be properly tagged so as to be unavailable for future borrowing until that share is returned. No share can be in a "Borrowed State" more than once.

  5. All short positions across all trading equities shall be reported monthly as well as all unsettled trades. What reason would there be not to?????

  6. Call this the "Piling On Rule". No short shall be executed to start the trading on a security where the short would represent a 5% or greater depression in a stock value from the previous Day close.

  7. No shorting shall take place on any security during the course of a trading day when that short would occur at or below 7.5% of the previous day close.

The reason for these two shorting restrictions is to prevent the false appearance of a sell off where the sell off is induced by the short itself.

In Conclusion:

The manipulation and abuse is one of trade settlement failures. In the condition of a CD, the lender can sell shares based on future rights and those sales are tagged as Long Trades. Under proposal SHO these would not be accounted for in a failed delivery situation. In addition, and longs who presently hold unsettled shares and elect to sell them will be sold as Long Trades and those again would not be covered under the proposed SEC Rules. Lastly, the improper tagging of a trade (Monthly NASD Enforcement action) where a short is marked as a long would not be covered under this rule until the violation of improper tagging was uncovered.

If the Focus is on fair market settlement laws than we can shut down the "Cheating" the abusers will already have in place to circumvent to laws. If you go to the NASD and/or SEC they will tell you there is no timeframe to trade settlement. The market needs a timeframe on that and all else will fall in place.

NASD Rule 3370 says:

"No member or person associated with a member shall accept a "short" sale order for any customer in any security unless the member...makes an affirmative determination that the member will receive delivery of the security from the customer or that the member can borrow the security on behalf of the customer for delivery by settlement date."

Does the borrowing occur before ...or after the consummation of the sale? Is it the member firm and not the buyer that assumes the default risk?

In the "Wild Wild West"...as one NASD Regulator put it this last week, we have an "unstable market". I ask....why is that? Do we not have one set of rules that governs our markets? Maybe we need one law ..that has "NO loopholes" so that there IS NO QUESTION as to what should and should not be protected. Is it the fact that no one even has to carry out affirmative determination...do shares just "exist" without proof? How many can you produce...Hundreds? Thousands? Millions? Who IS ACCOUNTABLE for those who create counterfeit shares and sell what does NOT exist?

Three to five years of these complaints by the OTCBB/Pink marketplace have fallen on deaf ears. Thousands upon thousands of voices calling out the same fraud scheme is now being admitted to by the SEC. As I was told just last week to file yet another complaint. I could hear that "deaf ear" talking to me on the other end of the phone. My suggestion to Market Regulation/NASD, was that NASD needed to change their policy and begin TALKING to the investor they are to protect, and to ENFORCE what is already in place to protect investors.

No one would stand for buying a house they could never live in...no one would pay for a car they could never drive. Those selling would be prosecuted and thrown in jail by the buyer for failing to deliver what was owed to them. Why is it that brokers and dealers can sell securities that do not exist, pocket the money, and walk away unscathed?

Moreover, why are the Regulators not prosecuted for lack of enforcement? Do they just get to sit at their desks and then collect HUGE yearly salaries and bonuses?

It is time for those who say they regulate, to REGULATE. It is time for those who say they exist to Enforce laws to protect the investor to ENFORCE. What happens in the job force when someone doesn't DO THEIR JOB? They are removed....fired....let go. I see a huge double standard here.

I say it is time to "remove" those not doing their job of protecting investors who have lost billions in this market, and who have obviously been protecting someone OTHER than the investor!



Modified: 01/16/2004