Hi Joe,
The answer to your question depends upon which exchange the stock in question trades on. If it's AMEX, NASDAQ or NYSE, then you might have a legitimate complaint. I say might, because the truth is, as an outside investor you really don't know how many shares are outstanding. You know only what insiders might tell you, or only what is included in the most recent filings. Reporting of additional shares issued is sometimes delayed or untimely, for a variety of reasons, not all of those reasons having the purpose of being to mislead investors.
Then we have the other 2 mediums in which stocks are traded, the OTC-BB and the Pink Sheets (or whatever name they call themselves now). These exchanges are not regulated, and the (SEC) rules regarding shorting may not apply (either partially or totally) to stocks traded on these unregulated exchanges. As with the bigger exchanges, outside investors know nothing more than what the company wants them to know regarding shares outstanding. And as we all know, many of the companies on these two exchanges are later found to have been less than totally candid with their ordinary investors. It's unfortunate, sometimes illegal and almost always unethical, but it is a known risk (management incompetence or dishonesty) when speculating on the OTC-BB and/or the Pink Sheets.
And there are differing rules for each exchange. In addition to the rules imposed by the SEC over the NYSE, NASDAQ and AMEX, each of these 3 exchanges also has additional rules of its own that pertain to the stocks traded on its exchanges. I'm not aware of any specific rules that the OTC-BB or Pink Sheets may have for their exchanges, but I wouldn't be surprised to hear that they do have some rules. I'd be surprised if any of these rules dealt specifically with shorting though. (Remember NASDAQ rules apply only to NASDAQ listed companies, not to OTC-BB companies.)
Finally, that means that you'll have to locate the applicable rule(s) that has/have been violated, and then "prove" the violation. This is a tough thing for an outside investor to do. Usually only company insiders have access to the information necessary to build even a prima facia case of wrongdoing...
Best wishes to you...
KJC |
