STOCKGATE, the biggest scandal to hit the markets yet!

Investigate The SEC ^ | 6-1-05 | Kevin M West

[abletruth]

What’s worse than Enron and Worldcom?

STOCKGATE, the biggest scandal to hit the markets yet!

By: Kevin M. West

Americans saw the television airwaves lit up this week with closure coming to the Worldcom fiasco by way of the CEO finally being held accountable for the crimes committed. Now we can finally sit back and say to ourselves “justice has prevailed and our SEC is really on top of their game”. Or can we?

The SEC has gone after Worldcom, Martha Stewart and Enron, but what about the biggest fraud in the market? Are they attempting to really go after the big guns, or is that smoke and mirrors hidden by these relatively small fish?

What could be bigger, you ask? We are happy you asked. Let us first show you a video of Senator Bob Bennett explaining this GIGANTIC hole in our market that is sucking trillions of dollars out of our country and out of investor’s pockets. Senator Bennett tells (watch the video at http://www.americaneedstoknow.com/senator_bennett.htm) SEC Chairman, William Donaldson, that the fraudulent action of naked short selling needs to be stopped! Senator Bennett explains that naked short selling is the selling of shares that haven’t been borrowed (as in the normal practice of short selling, the legal kind) and that don’t ever planned to be borrowed.

So, you ask, naked short selling is actually the selling of fake, counterfeit and non-existent shares to the investing public? Fake shares for real money, isn’t that a crime? YES, it is!

Now that you know that naked short selling it is NOT some sort of a conspiracy theory. It’s also not an excuse thought up by devastated investors looking for an explanation of why they lost their life savings through bad investments nor is it a hype used by stock promoters to have an excuse for their failing company. These are reasons that some of our tax paid government employees like Annette Nazareth (head of the SEC’s market regulation division) wants the public to believe. http://www.investigatethesec.com/DP270205.htm

Do we have your attention?

The SEC admits that naked short selling exists. They confirm this by putting Regulation SHO into effect this past January. So, for them to say it isn’t a problem is ridiculous. Of course, that regulation is so simple to get around that a child could figure out the loopholes in it. And, not only has the regulation proved worthless, but the SEC even GRANDFATHERED in these criminal acts that happened before this year! Would the Secret Service or FBI let you or I make counterfeit shares and sell them world wide on the open market and then tell us that we are forgiven from the past crimes, just don’t do it anymore…. “Please, with honey and sugar on it”. Of course not.

Why is the SEC not worried about this problem? We believe the SEC has suddenly become worried about this problem, because it can no longer be swept under the carpet. But now, the problem is so large that it could possibly bankrupt the entire market. If you thought Worldcom and Enron were huge frauds, you haven’t seen anything yet! We are talking TRILLIONS of dollars stolen from investors and businesses over the past several years. And where does this kind of money go? Not to the “Good Guys”, you can bet.

We have heard many stories of people that have lost entire savings and retirement accounts due to this atrocity. Families just like yours that have invested into good companies with brilliant ideas and products. Ideas and products that could have made this world a better place. What happened to these companies and the people that invested into them? They lost everything to a market full of fraud and corruption. Fraud and corruption so deep, it has to be protected at the highest levels. Once these businesses are bankrupted because of these crimes, the evidence vanishes with them. The criminals never have to pay and you never recover an investment that should have never gone bad.

Are there some bad companies and investments out there, sure there are. But the REAL bad companies and people are the very ones we trust to make sure our investments are safe. Trillions of our investment dollars are in the hands of crooks that are allowed to regulate their own actions. (SRO’s)

Can you imagine giving your life savings to a criminal to invest for you and let them be responsible to only themselves for taking care of your investment? Guess what, if you invest any money into the market, that’s exactly what you are doing every single day! See, the market is basically run on a merit system called an SRO or Self Regulatory Organizations. But I thought the SEC was in charge of regulation, you say. That’s funny, so did we!

Can you imagine what these unregulated, SEC protected and fearless thieves are waiting to do with trillions more dollars from social security funds that the President wants to give them? We don’t even want to think about it.

Now then, you think you may want to get your Senators and members of Congress behind Senator Bennett and get this fraud taken care of and put the REAL criminals in jail?

Stand up America, and take your country back!

Respectfully,

Kevin M. West

www.americaneedstoknow.com/stockgate.htm

Petition Status Report *Audio Clip* Bear Stearns implicates Regulators in Cover-up to protect Wall Street Fraud : 5 minutes excerpt of 1

[The Duke]

I think the key word here is "naked" - which is apparently a special variant of regular short selling.

Short selling itself if basically the practice of borrowing someones shares, selling them, then later buying them back and returning them to the original owner. When you do this (selling before buying) you make money when the price of the stocks goes DOWN (you buy it back for less than you sold it for).

Apparently this "naked" short selling is not borrowing to begin with, but somehow counterfeiting the shares. This *must* the effect of diluting the value of the stock, and also results in much higher shorts on the stock. Since short sells are votes of 'no confidence' in the stock, any short selling must have the effect of reduducing the value of the stock.

If the value is reduce enough the company goes kaput (when it should not have). The investors lose all their money while the short sellers can raclaim the shares for probably tenths of pennies on the dollar.

That's my take on all this.

[shoptalk]

"He that sells what isn't *his'n*, buys it back or goes to prison."
... that's how I was taught (about short selling - naked or otherwise) back in the day.

[SirJohnBarleycorn]

Naked short selling, in the sense of entering into a binding trade to sell shares which you do not at that time possess (either owned long or borrowed) is not per se illegal. Your broker will require that you have the required margin at the time the trade is entered, however. And on the settlement date your broker will need to deliver shares on your behalf to close out the trade, either by buying or borrowing them.

For many institutional investors, they are in fact prohibited or restricted by charter or regulation from many short selling activities.

The complaint here seems to have more to do with "fails" endangering the clearing system. However, clearing participants already have strict requirements regarding maintaining collateral to cover their positions. And as I mentioned before, fails as between a broker and its customer is a credit problem intended to be addressed by the margin requirements and the prudent self-interest of the broker.

"He that sells what isn't his'n,
Must buy it back or go to prison."

[frannie]

Thank you,

I am not dumb but 82 years of age, not old, widow and this really interested me. With no higher education or education in finance but do read articles that I don't comprehend, I appreciate your reply and it does give me a general understanding as I requested.

[SirJohnBarleycorn]

beat me to it, shoptalk!

[abletruth]

Short Selling is legal and useful. But this is Naked Short Selling, the naked comes from the brokeragess that borrows the stock from an MM "market maker" they get the stock via the DTCC "Deposit Trust Clearing Corp" the DTCC is owned by the SEC and makes a very small percentage on each trade legal or illegal "That was a question William Donaldson" couldn't answer when being asked by Senator Bennett.

The problem is the stock is to be returned in 13 days...the SEC has not enforced this 13 day rule for about 6-7 years. This is getting ready to be a major problem because it used to be just small cap stocks, now it is a problem on all exchanges. Go to ncans.net or investigatethesec.com both of these sites have excellent article about what could destroy our markets if not stopped immediately.

Senator Shelby and 5 other Senators are from the senate banking committee that have expressed serious concern but one Senator Collins is the chair to Homeland Security so it is possible there is a link to terror funding as I have read in some articles. The RICO statues have been mentioned as well.
able

[OldFriend]

GMTA

Wonder if I'll live long enough to see Global Crossing investigated and Terry McAwfull in an orange jumpsuit and shackles.

[frannie]

I have had three replies, I understand each of them.
Yours sound like one I might have made because it is the way I think of short selling.
I really know nothing about these "modern" transactions
but it just really interests me.
You might like to know I am 82, a widow and just like to read these articles about things I don't understand.
Thank you , it was a witty and I think an informative reply.

[frannie]

Thank you. Three replies to what I felt after I asked it was a stupid question. But it really has made understandable.

All three different but informative to me.

Thanks to all of you.

[justshutupandtakeit]

I understand short selling and this variant and both are among the most destructive forces arrayed against investors. Both should be banned.

Essentially it is the shifting of the supply curve using stocks which are almost always "borrowed" from margin investors. There is no reason a person would allow their stocks to be used to do this and it is brokers who do it without the permission of the real owners.

Other capitalist nations do not allow this blatant and fraudulent abuse of fiduciary responsibility on the part of brokers.

If these crooks want to bet against stocks let them do it in a way which does not BY ITS VERY NATURE cheat real investors, let them buy puts or sell calls.

[abletruth]

Frannie...Love seeing you using the web at 82 years young...

Go to www.ncans.net, www.investigatethesec.com, www.themotelyfool.com This problem if left unchecked could effect alot of people and their investments. I know I have been in some stocks that had their A/S just go up day after day when they never authoried the shares.

CMKX traded 42 billions last Dec 14, 04...they only have 703B A/S, so it is real, it is serious and it is not just the penny stocks anymore as it was when it started. Check those sites they have a lot of verified articles.
God Luck Frannie
abletruth

[oblomov]

Why? They are a needed check on the boundless enthusiasm of the stock salespeople on Wall Street.

[SAJ]

What nonsense. Markets go up, markets go down. What in the world is wrong with profiting when a market, in this case the shares of some company, goes down? If you happen to be an advocate of ''one-way'' mkts, which it sounds like you are, good luck to you -- no such things exist.

Now, naked short selling is not only wrong, it's a crime with multiple perpetrators. Stock shares are units of participatory ownership, unlike, say, a futures contract which is a binding commitment between two parties.

When a stock transaction occurs, there is always a buyer and always a seller, same as at the grocery store, except that the US allows 3 business days to settle the transaction, i.e. see to it that the seller gets his money and the buyer gets his shares. Naked short sales are never settled, or at least never properly. The seller may or may not receive any funds (he shouldn't, btw), but he does get what he wants, to wit, a position in the mkt. The buyer -- and naked shorts can ONLY ever occur if the buyer isn't paying attention to his account with his broker -- doesn't get squat, and may actually on occasion be paying for something he doesn't ever receive.

This is called fraud, and the perps are, in order, the naked seller, his brokerage, the clearing firm for the exchange on which the transaction was executed, and possibly sometimes also the buyer's brokerage.

Naked short selling and ''ordinary'' short selling are two entirely different animals, and you'd be well-advised to understand the difference between them.

As an aside, you **do** realise, don't you, that the NYSE couldn't even exist if all short-selling were banned?

[SAJ]

The bulk of the problem isn't counterfeiting, it's either laxity or incompetence (or conceivably criminality) on certain brokers' parts, coupled with less-than-adequate clearing enforcement. The clearing firms simply MUST stand up and start declaring punitive fails when some would-be sharp operator tries on a naked short.

The brokerages that tolerate this practice will get the message in -- pardon me -- a New York taxicab minute.

[SirJohnBarleycorn]

I can't believe I just wasted 5 minutes of my time reading "Dr Byrne's" explanation of "naked short selling" at ncan.net

Look, the first point to understand is that the consensus of economists for a long time has been that short selling, in principle, is not an evil thing. The SEC has said as much each time it adopted or amended the "uptick rule."

Secondly, the far narrower allegation that some folks may not properly be enforcing the delivery-versus-payment rules in the margin regulations against their hedge fund customers is a matter for the SRO and SEC enforcement divisions - send them the evidence and if it holds up in enforcement proceedings, hang 'em by the yard arm, I say. Its certainly not something to gets your shorts in a knot over, if you'll pardon my pun.

[the invisib1e hand]

well, you use a lot of words, but I have to tell you, it's clear that you really haven't thought short selling through.

Funny thing about life. As you gain more experience, you learn that the things you thought you knew all about weren't exactly what you thought they were at all; or the things you totally disagree with, sometimes prove to be wise and reasonable after all.

[SAJ]

Sorry, mate, but you can't get rid of short selling w/o completely rewriting the rules of NYSE (and, here's a tip -- that ain't gonna happen until everything goes totally electronic...which will have its own set of problems). Who do you think the great majority of the shorts are, in listed stocks on a daily basis? Not every day, mind, but on any given day. It's not funds, not individuals, not banks -- it's the floor, the specialists. They're required BY RULE to make a market and complete a transaction. If -- as happens every day except big down days -- they haven't any shares on book, and a buy order comes in, doesn't matter, they MUST complete the transaction...which in this situation means ''get short''.

[the invisib1e hand]

consensus of economists

it really disappoints me when people cite stuff like this as a reason to hold a certain opinion.

socialized education...socialized medicine...socialized self defense, and now, socialized thought.

[SAJ]

Exactly right, m'friend. Fails haven't been this bad since 1968-1969...and we all (well, us older types anyway...g!) recall what happened when SEC started clamping down on fails back then.

How many **hundred** brokerages, good names too, closed their doors, eh?

SEC, NYSE, and NASD need to, simply have to, revive punitive fails. Don't know if that's going to happen, though (sigh).

[EverOnward]

"I have had three replies, I understand each of them."

I think you're ahead of me, frannie. Kind of got the jist here -- but the "puts" and "calls" sent me back a bit. Bonds and T-bills, that's about my speed. Never liked gambling...