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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation?
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To: rrufff who wrote (4414)5/9/2009 8:56:17 AM
From: kknightmcc  Read Replies (1) of 5034
 
That is correct. The owners of stock loans that are individual investors are not compensated for the loan out of their stock. I wrote about that to the SEC nearly three years ago and nothing has been changed to date:

Subject: File No. S7-12-06
From: Kathy Knight-McConnell
Affiliation: investor
July 19, 2006

In addition to the revocation of the "grandfather clause" in Regulation SHO, which I believe to be a necessary amendment, I also propose another rule which should be enacted by the SEC in that all brokerage accounts should have a place in every account where the party who owns the account can choose to request that none of their stock can be borrowed for the purpose of lending for a short sale and that person's stock should be removed from the lending pool if they so choose. We, the small non-institutional investors, have no such choice at the moment other than to take physical delivery of our stock, which is inconvenient for various reasons. It is not right that a person who buys stock long should have their stock shorted against their will. Let the short sellers borrow stock from parties who are willing to lend their stock for the purpose of facilitating a short sale. In the event that a borrow is allowed by the party who owns the stock (even in street name), the party allowing the borrow should be compensated by the party who is borrowing the stock for the loan. The large companies that loan their stock always get a percentage of the value of the stock loaned, so it is only fair that the non-institutional investors be given the same consideration. I know this because I once had a position, many years ago, working in a stock loan firm on Broad Street where we located stock for institutional investors for short term trades, usually three days, and took a small percentage commission to do so. Put the small investor and the institutional investor on the same footing. It is only fair. We take the same risk, we should get the same rewards or have the choice not to allow our stock to be used for the purpose of facilitating a short sale.

sec.gov
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