Why won't the security regulators(SEC, NASD, NYSE) do any thing about the illegal shorting of securities?

Question

Naked shorting destroys companies, jobs and assets. The regulators are well aware of the problem and yet they do nothing. The SEC passed Regulation SHO pretending to do something about it. All they had to do was enforce the laws that have been in existance since the 1930's. The SEC is even grandfathering the crooks and the stolen money. Chairman Cox sits on his hands and does nothing. It is estimated that thousands of companies have been destroyed by this. An estimated trillion dollars have been stolen. Where are the cops? Congress has ignored this problem even though their constituents constantly batter them with requests for action. Senator Shelby has refused to hold meetings on this subject. Is he on the take? Is he a puppet for the security firms?

Answer 1

It's a Conspiracy!

You spend hundreds of words complaining, but offer no real specifics, nor a solution. What is it that is illegal about selling short? You don't tell us anything but wa wa wa.

You seem rather knowledgeable about the subject, so you must know that these short traders provide liquidity to the markets, and they must cover at some point, provididing an artificial rally. When they get caught in a short squeeze you probably don't complain.

You sound like one of those typical people whom Norman Vincent Peale remarked about:

"Americans used to roar like lions for liberty. Now we bleat like sheep for security." --

Answer 2

I don't know where you are getting your information -- but you are way off base. The companies don't start doing poorly because of the short sellers -- the short sellers come in because they see that the firm is going to do poorly.

Shorting stocks is not illegal. It was not made illegal in the 1930s. At that time the uptick rule was instituted to keep people from manipulating the market by selling short. This actually means that short selling should only occur when people feel that the stock will fall because of the company's fundamentals.

There are many times when short-selling is beneficial. For example, Investment Banks short stocks at IPO. If the IPO fails, they are able to stablize the price by covering their shorts at the IPO price. If the IPO doesn't fail, then they have an agreement to buy more shares at the IPO price. For both sides of this deal, it is the investors, not the I-Bank, that benefits.

As for other companies, short sellers do not destroy the value of these firms. Trading is in the secondary market -- so no money is added to nor subtracted from the company. The cash flows of the firm do not change because of this. If the company is going to do well, the information will come out and the short-sellers will be hurt. If the short sellers are right about the fundamentals of the company -- then they will benefit.

But investors of the firm can observe shortsellers coming into the market. Since they can observe this, they should be able to see if the firm is in trouble. This way, they can get out before the company implodes -- rather than being taken by surprise -- which is what would happen if there were no short sellers.

Don't blame the short sellers -- learn from them. They provide a valuable service by pointing out firms that could be in trouble.

Answer 3

Yes, but I think our own response to national security is a bigger threat, and because of that I am frankly more involved with the election right now than on this board. (Yeah, so Ron Paul may not get the election, he still is a more constructive place to put my time, at the moment.) Any time you 'ok' a populace living outside of the law, you have a group subject to manipulation by others who break the law. Maywood used to get a lot of play here as a town where more illegals than legals live in California. There were laws in effect against giving traffic tickets because illegals might be caught without licenses, etc. They used to fly the flag of Mexico on their city hall, and put one up on the Post office during a Save our State rally there. But you know what? Maywood residents went to Jerry Brown to get an investigation of their police department. Their sister city using the same police department didn't. (similar demographics, look into it and follow the cartel $ chain) Those towns that 'belong' to the cartels are no longer all on the other side of the border. And yes, that is a real threat. However, it is bigger than just illegal immigration. It is an overall question of why we aren't holding our government accountable to US as citizens, and accountable to our Constitution. If we do that, we can fix the economy, and a lot of the pain of this topic can be eased, to begin with.

Answer 4

Shorting stocks isn't illegal, stupid. It's also not bad for companies. These are nothing more than contracts having to do with the future sale of stocks, of various sorts. And those contracts have value and can be sold. If they couldn't, neither the stock market, the futures market, options, or insurance could exist in its current form.

You are simply going to have to face the fact that we don't deal in hard assets anymore as an economy and as a culture. We are an invester economy and have been for decades.

Answer 5

Why don't you sell short some stocks and make a few millions and forget about the whole thing?

Answer 6

That's why we have class action lawsuits.