Last September the SEC stated they have zero tolerance for abusive naked short selling yet they have rarely if ever locate violators.
How does the SEC determine whether an institution is in compliance with rules?
They don’t. Presently the only way they determine compliance is through an SEC audit they do months after institution is flagged if at all.
In the case of a bear raids does not work.
Here are some Bear Raid Common sense suggestions that would be more effective than an uptick rule.
1. Do what we pay you to do regulate the market! If you don’t be criminally held responsible. No more blanket immunity like you gave Mr. Paulson,.
2. Amend Regulation SHO effectively to require broker-dealers before they accept short sales orders / effectuate short sales from their own account. Require by law shares in hand that they are shorting. If they don’t take the brokers license away for life and fine the firm 100X what they failed to have on hand. No one would risk their license to help out a friend and no firm would look the other way or promote this loophole.
3. Eliminate the broker having “reasonable grounds to believe that the security can be borrowed.” Everyone sees what it cost the world taxpayers when we have no oversight system in place.
4. Long positions are required to be disclosed yet substantial short positions are not. They should be treated equally and both should be reported.
5. The SEC should vigorous enforce action against violations such as the Regulation SHO and all other attempts at market manipulation. Start with FAZ and SKF since the government are now such a large shareholder.
6. Fines and penalties should be so severe to curb illegal temptation and more importantly not encourage.
7. Hire hundreds of enforcers that know the game and are presently laid off by the institutions. Use the Wallstreet bonus system the more illegal money and corruption they locate the more money they earn.
sharron8:36PM March 10, 2009
Been through the 2002 bear market and IMO the uptick rule did temper the bear-raids back then. One must remember fear is a much stronger emotion than enthusiasm, and the shorts only need to trigger an avalanche and they’re quickly joined by fear-stricken sellers on the fence. Why do you think the bear-raids typically took place after 3, so longs have no chance to recover, and who wants to go long at 3:30 when market is dropping 4% in 30 minutes.
Jimof NJ4:31PM March 10, 2009
That people who short stocks are traders, not investors. We eliminated the uptick rule for benefit of TRADERS, NOT YOU.
And sure enough, YOU paid for that grievous error---and you're still paying. A LOT.
U.S. News Money takes a contemporary look at happenings in the financial world and aims to help young investors get going with their portfolios--or just sound cool at cocktail parties.
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sharron 8:36PM March 10, 2009
Jim of NJ 4:31PM March 10, 2009
Muser of NM 3:20PM March 10, 2009