It's not "illegal" to short BB stock, it's just rare that a retail investor can do it and one has to have some kind of connection, usually lots of money and generate lots of commissions. You can't do it with most online discounters.
If you are a strong customer at a full service house, and some not so full service places, and you have a strong financial backing, you can make arrangements to short OTC BB stocks, supposedly subject to clearance rules.
It's not easy for us retail investors to do it but not impossible. Hedge funds, as well as corporate insiders, do it all the time. The naked short controversy, and the issue of insiders selling restricted shares, have nothing to do with whether or not it is illegal. It's rather a question of whether they actually are required to actually find shares to lend to the shorter and whether or not those shares are legal and unrestricted.
There have been loopholes and lax enforcement and a fear by our regulators in getting involved heavily in a complex area, one that is little understood by other than those who seek to skirt the rules. Also, much apparently has been taking place in foreign markets where the hedgies can find ways to arbitrage without actually borrowing shares.
But, not something that you and I can easily do, even if we wanted to do it. |
