In response to msg 34061 by USCCocky01 tinyurl.com
Re: Send the OIG letter to your State Governor and AG
The key expression is "settlement failure" rather than "naked short selling" or "failure to deliver". As the criminals know how to confuse the issue when the latter two expressions are used. However "settlement failure" is clear as a bell and there are no legal excuses for violating the settlement rules.
As I point out in the letter, the SEC and Wall Street come up with reasons they call "legitimate" for failing to settle as contracted, which is kind of them to fill us in, but none of those excuses the act of failing to settle. Some naked short selling might be legitimate under current rules - so long as they do not lead to settlement failures.
So let's concentrate on settlement or rather the failure to settle as contracted. Because failing to settle as contracted is a violation of federal rules and laws and state laws as well, without exception:
Under § 8-501 of the UCC, securities accounts must have financial assets credited to them as agreed. This means, “securities entitlements” credited to accounts after settlement date, must be identical to the contracted security – they are not valid as an IOU marker to eventually settle when settlement fails. The SEC should not allow SROs to ignore UCC requirements.
The SEC’s Division of Trading and Markets is correct in saying the number of issued and outstanding securities cannot be increased by market participants. But this only confirms that when broker-dealers credit more securities after settlement date to accounts than exist, they are indeed misrepresenting securities to accounts from whom they took the purchase money. If only 100 shares exist, after settlement date only 100 can legitimately be in customer accounts, not 200 or any amount over 100 shares. The excuse, that the UCC allows “securities entitlements” to be credited as an IOU marker when settlement fails, not representing settled securities, is false.
Telling is that no SROs or any SRO members misrepresent securities amongst themselves. They actually correctly represent securities, because when settlement failures occur, “fails to deliver” and “fails to receive” securities are issued and correctly identified among SROs and their members. The misrepresentation of securities is reserved for investor accounts and the markets.
Cover Letter:
Dear Jacqueline Wilson:
We are very concerned that the SEC is deliberately protecting SROs, allowing them to violate the governing rules regarding settlement and the poroper crediting of accounts, harming investors and issuers.
For these reasons we are requesting an audit to find out why settlement failures are treated with white gloves and who within the SEC is responsible for letting SROs off the hook, even though the SROs and their members are causing them while violating their obligation to enforce the governing rules. It’s like the police committing crimes.
Rather than compel SROs to enforce the rules, instead the SEC goes to great effort to excuse violations by SROs and their members to the governing rules regarding settlement and crediting accounts. The SEC website and SEC court Amicus Curiae filings have created a body of excuses, labeling SRO violations as “legitimate violations”, including to the UCC § 8-501 and SEC rule 15c6-1 – without any legal foundation or data. By failing to compel the SROs to enforce the governing rules and instead excusing the violations, the SEC is failing its legal obligation to protect investors, issuers and regulate the SROs. Why?
I would be happy to discuss this further with anyone in your office, to assist in this matter or to supply any documents that I may have or can obtain.
investorvillage.com
(The poster, tommytoyz, is Tom Vallarino, the author of the OIG letter) |
