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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation?
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To: Leeza Rodriguez who wrote (392)10/21/2005 1:16:04 PM
From: rrufff   of 5034
 
Hi - it's an area that is evolving. There was always the broad SEC prohibitions against manipulative behavior contained in Reg 10(b)-5 and other regs under various code sections. I believe that a serious case could be made under these sections that shorting one's own shares or collateral, in an essentially riskless transaction, without disclosure, whether or not in association with others, would constitute manipulation.

During the debate on Reg Sho, there was a section supposedly put in that would not allow settlement of a short with shares received from an offering, including a PIPE or a convertible. I am not sure how that played out and have meant to research it. If anyone else has info, feel free to post.

The way toxic financing kills a stock is that the lower the stock goes, the more stock the lender gets, which in turn is shorted, etc.,creating the theoretical "short to 0". With manipulators, there are endless ways that they have been alleged to have shorted, including the use of offshore accounts.
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