DAVID PATCH'E 100% PURE BALONEY!! FULL DETAILS HERE DEBUNKING THIS BOGUS DRIBBLE PLEASE VISIT Message 22731756
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STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Global Links FOIA Data provides insight into SEC Negligence –
August 18, 2006
David Patch
While Congress investigates the allegations of SEC cover-up and preferential treatment
in the John Mack - Pegasus Capital insider trading scandal, another set of data may
provide insight on how negligent the agency can be when it comes to investor protection.
In the mail today I received CNS trade settlement failure data on a company called
Global Links (GLCC). Global Links, as you may remember, was that particular company
Senate Bennett challenged former SEC Chairman William Donaldson on in a 2005
Senate Hearing regarding our capital markets.
During the March 2005 hearing Senator Bennett read aloud excerpts from a
Financialwire article in which a shareholder of Global Links was identified as purchasing
the entire shares issued and outstanding of a company on a single day and yet he could
not get access to delivery on those shares. The shareholder even filed with the SEC his
purchase according to SEC requirements of shareholders holding greater than 10% of a
companies stock.
To Donaldson, Bennett quipped "this article just last Friday in a national publication
indicates that people are still selling short shares that they don't have and clearly are
never gonna acquire.” Bennett continued, stating "My main message here is that the
evidence is Rule SHO is not working, so that's what we need to get into in detail." He
concluded by directing Donaldson to present an "in depth briefing" to the committee on
SHO and Global Links.
Still, 17 months later Global Links remains on Regulation SHO and the investor who
purchased the entire shares issued and outstanding remains short on delivery of his
purchase.
Why? It is all in the evidence the SEC provided under a FOIA request.
According to the FOIA request signed by Felecia Taylor, Lead Research Specialist of the
SEC’s FOIA Office the number of fails in Global Links had accumulated to 10,088,023
shares on April 18, 2005. That number, for the record, represents 10 times the total
number of shares issued and outstanding by the company at that time as a corporate
action had brought the total shares issued and outstanding down to 1.1 Million shares..
Also stated with the data submitted was a comment indicating that there were no fails in
Global Links prior to April 18, 2005.
The reason the fails did not show up until April 18 with the trades occurring in February
is easy to explain. The reason the number was so high is just as easy.
On February 1, 2005 Global Links underwent a 1:350 share split which included a full
CUSIP change. During events such as this a security will trade “when-issued” in the
market pending the conversion of shares from one CUSIP to the other. The period for
the conversion was from February 1, 2005 to mid April 2005. During this period the
DTCC does not track settlement failures as shares can not settle until they are issued.
But what happened starting February 1, 2005 was that Wall Street never adjusted
shareholder accounts and market makers never adjusted the market to reflect the 1:350
reverse split. The stock traded at exactly the same price as it had the day before even
though the number of shares had been reduced by 350.
And with shareholders accounts representing the same massive quantities of shares the,
stock traded accordingly.
Problem is, those shares were not real, and the market makers and Wall Street were
responsible to know this. It is an obligation of a market maker making a market to
maintain accurate information on the companies they make a market in.
As the market makers continued to make a false market in the stock shareholders, new
and old victims, were buying into their error. In the end, millions of illegal shares were
traded and the market was out of control.
Here is where it gets interesting.
The SEC had to know this. Unless the SEC did not bother to follow up with the Senators
specific request to look into this company, they had to have seen this issue coming. The
evidence was happening real time.
Instead of halting the stock and addressing the error the SEC continued to let the stock
trade and the abuse persist. Precedence for halting the stock comes by way of
potentially a better qualified regulator, the Financial Services Authority (FSA) in London.
During a similar trading pattern such as this regarding a company called Room Service;
the FSA halted the stock while it conducted an investigation where one Individual firm
had accumulated a 253% short interest in Room Service on settlement failures. After
concluding the investigation, the FSA unwound the illegal trades and refunded the
money plus commission.
The FSA protected the market. That was over a 253% short interest where this issue
with global links was over a 1000% settlement failure issue.
For the record, under regulation SHO, all 10 Million fails created were grandfathered.
Now one might ask the question of why the SEC would leave this obvious snafu alone. It
is actually quite simple.
The SEC is not about protecting investors and it is not about protecting businesses, it is
out to protect Wall Street and the reputation of Wall Street.
Both Global Links and the investor who purchased those total number of shares issued
and outstanding have filed formal complaints with the SEC and, according to both, the
SEC has turned the tables and accused them informally of stock manipulation schemes.
They have indicated that no support will be forthcoming in resolving the matter of
delivery failures and excessive shares manipulating the markets.
Remember, there are now 10 million extra shares available to trade hands on any given
day. Too much supply, too little demand, and you have a depressed stock.
And since February 2005 Global Links, in raising money to keep the business
operational, has added shares into the mix bringing the total number of shares issued
and outstanding to 15 million shares. Certainly enough now to cover Wall Street’s little
secret. The SEC expected this which is why they viewed this as a “minor problem.”
The money raised was done at the manipulated stock price so more shares were issued
than would have otherwise been issued. Another move the SEC was aware would take
place and a move that resulted in all shareholders real and excess shareholders being
injured.
As an example, for the filing representing the period ending December 31, 2005 the
number of shares issued and outstanding had accumulated to 15 million from the
original 1.1 million shares on February 1, 2005. The result of the added increase in
shares available allowed for the 10 Million fails identified in April to be reduced to 5.97
Million on 12/30/2005.
Now interestingly, the latest short sale information on Global links has identified that
there are only 6800 shorts in the stock. This scenario I present explains such data. The
fails are long fails because Wall Street was trading shares held long in investor accounts
even though they had allowed shareholders access to 350 times more shares than they
rightfully owned.
The SEC and others have accused these long fails on insiders selling restricted shares
but in reality, these are merely Wall Street manufactured shares that nobody would be
wiser too had the FOIA data not been requested.
These are the secrets the SEC is keeping from us and now, one can only wonder how
many more like it there are. In fact, in the most recent proposal, the SEC posed a
question for comment that implies that the SEC knew very well what these fails were
applied to:
“Should the Commission consider granting relief to allow market participants to close out
fails in threshold securities that occurred because of an obvious or inadvertent trading
error? If so, what factors should the Commission consider before granting the request?
What documentation should market participants be required to create and maintain to
demonstrate eligibility for relief? Should the cost of closing out the fail be a part of the
economic cost of making a trading error? How would the proposed amendments affect
price efficiency for fails resulting from trading errors?”
A trading error of huge proportion and the SEC questions whether the members should
have to account financially for such errors. Nowhere in this question does there appear
any concern over the impact these errors have on the investing public or the businesses
involved. While the SEC debates this issue they have elected to allow free passes on all
present trading error abuses.
Maybe this is what former Chairman Donaldson meant by “how much fraud are you
willing to accept for liquidity?” What more liquidity do you need in an illiquid market than
10 million counterfeit shares floating in investor accounts?
I suggest a full Senate Judiciary investigation into all those who participated in the
original investigation requested by Senator Bennett. This fraud could have easily been
averted but it wasn’t. The Judiciary Committee should find out why.
By my rough calculations, if $5000 buys 1.1 Million shares as evidenced by one
shareholders purchase and 10 million shares were oversold, that equates to $50,000 in
illegal trading. But since the problem was off due to a 350 multiplier, the market cap
manipulation really equates to 350 times $50,000 or $17.5 Million. That is what the SEC
is protecting.
Never a better time than now to www.InvestigatetheSEC.com.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006 |
