NCDR Message Board - Msg: 9888952

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Microcap & Penny Stocks : NCDR

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To: lindend who wrote (461)	6/1/1999 2:11:00 PM
From: Arthur_Porcari	Read Replies (2) of 1440

Linden, the SEC has nothing to do with regulating which stocks can be borrowed or not. It is the Federal Reserve Board. It comes under Reg. T when dealing with Brokerage Firms and Reg. U when dealing with banks. If Schwab lent money against "Type 1" (Cash Account) stock, then they violated Reg. T. This would even be the case in which a stock is marginable but held in a cash account for a customer. But in the case of BB stocks, they are not marginable under any condition at a brokerage firm and therefor cannot be lent legally. The only instance that I am aware of that a BB stock could be legally shorted is if a short seller made a private arangement with an institution to borrow their paid for shares that are in the institutions possession. However this cannot be done through a legitimate brokerage firm. If you would like to provide the specific transactions, I would be most interested. However, it would be sufficient for you to provide the name of a Schwab representative that allows such a trade. I have a very good friend that has a $10 million trading account at Schwab who has yet to be allowed to short any BB stock. No matter what equity he puts up.

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