Found on SEC.gov:
Subject: File No. S7-08-08 From: John Drombosky
March 27, 2008
Let’s see…You’re asking for public comments about naked short selling and a proposed anti-fraud rule you propose to implement?
What’s wrong with you folks? Naked short selling of securities, is someone selling something he/she does not have, does not have any “borrowed” shares to back up the short sale, historically does not even have a plan to cover because the hope is the manipulation it causes typically drives the targeted victim out of business so no cover is ever required.
You’re asking if it’s OK to enact a rule that prohibits THEFT? Have you never been to an ethics training session?
Something like a prohibition of theft should be a no-brainer, regardless of your position at the SEC. And by the way, the way naked short selling is done, it constitutes counterfeiting of securities, since the broker/dealers who participate in this practice assure the victim-buyer that yes, the share exists, even if it’s just an electronic marker in the buyer’s account. It’s a fake share that was created out of thin air. And the result when done en mass, is to drive the price per share of the target company into the cellar. (ever hear of cellar-boxing?)
Naked short selling robs the investors of their money, in exchange for something that never existed in the first place. The investor doesn’t even know the share doesn’t exist when the purchase is made. But in spite of the investment being made in a company that should have potential, the price per share keeps going down as the manipulation continues. The company doesn’t get the revenues for these naked short shares sold. The company loses operating revenues. And most times, the company is forced out of business.
When the company goes under, the naked shorts never have to be covered, and the crooks who sold these fake shares never even have to pay taxes on these ill-gotten gains.
Where is your common sense? Of course nakes short selling should be illegal. In fact, there are already criminal statues on the books for grand theft. (many naked short schemes net the perpetrators millions of dollars and more)
The SEC needs to enforce the laws that already exist, that prohibit market manipulation. The Secret Service should be involved since this activity constitutes counterfeiting of securities. The Department of Justice needs to be involved to prosecute those (even in the SEC) who condone such activities. The SEC is, after all, supposed to be protecting the investor against such crooks who rig the securities system against the investor.
Most of all, the FED needs to be involved, because the penalties are already on the books for compensating individual investors against such fraud, such as naked shorting securities. If I read it right, the FED guarantees compensation to harmed investors, to the tune of a dollar per share MINIMUM. The penalties involve a formula to extract payment from the perpetrators, backed by the FED to ensure full payment, which includes a multiple of the trading price per share, plus a dollar, times the number of days the naked short share failed to deliver.
On top of that, if the naked short activity is a coordinated effort among broker/dealers and the DTCC, CEDE and Co, and SEC, RICO laws kick in which allow for triple damages to the injured investor.
The laws are already on the books, and you want to know our comments concerning your new proposal about naked short share selling? How about “enforce your rules and laws already on the books?”
In reading the other comments, it surprises me how many other companies are in the same situation as the company I own stock in. This problem is PERVASIVE, and appears to be SYSTEMIC in the security exchanges. I assumed that it was just a practice common to the micro-cap companies. Well, I was wrong. And your failure to act before now, with laws already on the books is even more egregious
I am a shareholder in several companies that were naked shorted off the exchanges. But one in particular did not go bankrupt like so many others did. CMKX was the trading symbol on the Pink Sheets. Our corporate attorney tried to present evidence of 2+ TRILLION naked short shares, during the administrative hearing to revoke CMKX. He was kept from presenting such evidence. The proof exists.
CMKX requested the initial decision to be enforced, revoking the trading status of CMKX. This locked in the naked short position. Many of the shareholders now own certificates of ownership. Documented proof of what is claimed to be the naked short in our company. DO YOUR JOB
By the way, CMKX was revoked because of the failure to file financial statements with the SEC. How, may I ask, can a CEO of any company legitimately sign off on financial statements, knowing that a significant naked short position exists? That naked short position affects the financial statement. A huge naked short position affects the financials in a HUGE way. Signing off on financials, places the CEO in jeopardy if those financials are flawed.
I submit Urban Casavant was in a no-win situation. Turn in signed financials, and he’s in trouble for flawed financials. Don’t file financials, and his company gets revoked. (in most cases, revocation results in a corporate bankruptcy, in which case the naked shorts go away.) Well, CMKX got revoked, and we didn’t go away. It’s time for your to do your job
My understanding, is that if presented with evidence of a crime, you become obligated to investigate to determine the merits of that evidence. Instead, prior officials simply discounted the evidence by denying the existence of naked shorts, saying it was meerly an excuse to complain about a stock that didn’t increase in value.
Times have certainly changed. Naked short sales do exist now, don’t they? Well, the proof of 2+ trillion naked short shares still exists in CMKX. I don’t think you need to wait for this proposed rule to become effective. You already have the rules and laws on the books to open your investigation, and go after the perpetrators of what seems to be the largest example of naked short selling in the history of the exchanges.
To continue ignoring the naked short position of CMKX is to exagerate your dereliction of duty in pursuing the criminals who continue to rob the small investors of this country.
Finally, I recall President Bush proposed modifying the Social Security system, to permit individuals to invest in the stock market, rather than invest in the Social Security system, as a way to bolster and protect the system. Can you imagine the debacle if investors put their social security money into your stock exchanges, only to have it evaporate because of naked shorting market manipulation and fraud? Please, if you would, explain to the President why his Social Security Reform plan won’t work
Comments on the naked short selling anti-fraud rule? How about, on the way to passing this new rule, you go back and begin enforcing the rules you already have against market manipulation, counterfeiting securities, and fraud? How about explaining how REFCO can have millions of dollars on their balance sheet for shares “sold but never purchased”? And perhaps even explain how it is NevWest can get off with a minimal fine for millions of dollars in questionable transactions of CMKX securities, and the seller, can get off scott-free?
Come on, guys. DO YOUR JOB. This rule-making exercise you’re going through might make for good press releases, but it’s just one more rule in a BOOK of rules to prohibit the same activities. DO YOUR JOB.
Edit: I tweeted this post to the SEC and GG. I encourage others to do so as well. If you’re too lazy to type anything, feel free to steal mine:
Hey @SECGov, Reddit is now finding letters on your website, dating back over a decade, begging you to DO YOUR JOB, and calling out specific instances of fraud on a MASSIVE level. Why did this go ignored? bit.ly/Marketfraud @GaryGensler #DOYOURJOBSEC #GME #GameStop $GME