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To: afrayem onigwecher who wrote (10922)1/10/2003 9:59:37 AM
From: StockDung  Respond to of 19428
 
spam, lol->Subj: Aspirin sample for Craig Goon
Date: 1/10/2003 3:53:34 AM Pacific Standard Time
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To: xxxxxxxxxxxxxxxxxxxxxxx
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To: afrayem onigwecher who wrote (10922)1/12/2003 4:14:31 PM
From: StockDung  Respond to of 19428
 
WorldCom Investors to Complain to NASD

By MEG RICHARDS
.c The Associated Press

NEW YORK (AP) - In an unusual move, a group of small investors who say they lost their life savings because of Wall Street analyst Jack Grubman's puffed-up stock rating for WorldCom Inc. are taking their complaints en masse to the security industry's watchdog group.

The group of more than 100 investors are filing an arbitration claim Monday with the National Association of Securities Dealers, said Robert Weiss, the investors' attorney. Weiss said his securities firm could handle up to 100,000 similar claims.

The investors each lost less than $25,000 in WorldCom's financial meltdown, which ended in bankruptcy last year, Weiss said Friday.

``These are not wealthy people. These are real, Main Street people, retirees who did not have big portfolios, and they lost everything they had because they relied on this research,'' he said.

Claims presented to the NASD for arbitration are generally considered individually, and it would be unusual for a large number of related cases to be presented at once, said Linda Fienberg, president of the group's dispute-resolution program.

Grubman helped send WorldCom stock soaring by giving it high ``buy'' ratings even as the company stumbled early last year. Weiss maintains his clients purchased WorldCom stock based on recommendations Grubman made as an analyst for Citigroup's Salomon Smith Barney brokerage unit, and did not understand the risks.

WorldCom filed for bankruptcy protection in July, nearly collapsing under a far-reaching accounting scandal that cost investors more than $7.5 billion. The Justice Department and the Securities and Exchange Commission are investigating the accounting abuses, which have led to criminal charges against several former top executives.

Last month, the nation's biggest brokerage firms agreed to pay $1.44 billion to resolve government charges they gave biased stock ratings and promised to change the way they do business. Salomon Smith Barney was to pay the heaviest fine: $300 million. The settlement did not make clear how investors would be compensated for their losses.

``There is a tremendous debt that is owed from Wall Street to Main Street as a result of this fraud,'' Weiss said, adding that he believes his clients are owed 100 percent of their lost funds.

Under almost all brokerage account contracts, investors agree to attempt to settle claims through arbitration, instead of taking them to court.

Most claims presented to the NASD for arbitration involve larger sums and are heard by a panel, Fienberg said. Claims for less than $25,000 usually are considered by a single public arbitrator who issues a decision based on evidence, unless the investor requests a hearing.

Grubman quit Salomon Smith Barney in August. The NASD fined the brokerage $5 million to settle charges that his research was misleading and filed a complaint against Grubman.

Grubman's attorneys did not immediately comment. His former brokerage declined comment on the claims.

``We can't comment on a claim that has not been filed, except to say we take all client claims very seriously and review each on its own merit,'' spokeswoman Susan Thomson said Friday.

On the Net:

National Association of Securities Dealers: nasd.com


01/12/03 14:55 EST



To: afrayem onigwecher who wrote (10922)1/12/2003 4:20:07 PM
From: StockDung  Respond to of 19428
 
Cuba's cruel joke
First in a series: Forty-four years after the revolution, Cuba's poor beg for food, the rich drive Mercedes and the U.S. dollar is official currency

Lawrence Solomon
National Post

Saturday, January 11, 2003

CREDIT: Mike Faille, National Post

An illustration of Fidel Castro drving a Mercedes car. nationalpost.com{51F46E7C-5B1C-4834-9022-FC5F7F1FA7FE}

'Can I have your bones?" the old woman asked my eight-year-old daughter, pointing to the gnawed remains of the chicken leg that had been her lunch. Seeing that my daughter was perplexed, the old woman displayed a box of chicken bones that she had collected from other customers at the lunch counter of the department store, a respectable establishment frequented by locals in Old Havana's main shopping street. My daughter provided the bones after the lunch counter staff gave its consent -- the old woman was evidently a regular at the lunch counter, and this was how she earned her supper.

Welcome to Cuba, 44 years into the Revolution that was to industrialize the economy, eradicate hunger and eliminate the gap between rich and poor in this island nation, previously the most prosperous in the Caribbean. Today, the once-muscular Cuban economy is in tatters and its much lauded social safety net a cruel joke. The poor, in reality, are bled to support the lifestyles of the government elite, which lives in luxury -- the driveways of the Havana honchos sport Mercedes -- while its populace goes hungry.

Some Cubans outside government --increasingly those who obtain patronage positions in the tourist industry, where they receive tips and other payments in U.S. dollars -- manage comfortable, if meagre, existences. With dollars, they can shop in the many "dollar" shops, where they can obtain some of the consumer goods, medicines and dairy products that most Cubans, prior to the Revolution, could readily obtain.

The great majority of Cubans, however, are left to fend for themselves in a pitiless system. Most must "do business" to survive, as Cubans put it, because most cannot subsist on the typical wages -- the equivalent of about 50 cents a day -- that the government sets for them. The old woman at the lunch counter begged for food; other Cubans beg for old clothes or for medicine, or sell peanuts on street corners. Young men sell cigars and other goods in the burgeoning black market; young women sell their bodies in the burgeoning sex trade.

Without dollars, life is grim. People line up at dimly lit government distribution centres, ration books in hand -- libretas, the government calls them -- for their monthly allocation. The books, which were established in 1962 to "guarantee the equitable distribution of food without privileges for a few," entitle Cubans to 2.5 kilograms of rice, 1 kilogram of fish, 1/2 kilogram of beans, 14 eggs and sundry other basics at subsidized prices. Through the libreta, each Cuban also gets one bread roll a day. Every two months, a Cuban is entitled to one bar of hand soap and one bar of laundry soap. Fresh fruits and vegetables come infrequently; meat might come once or twice a year. Until the mid-1990s, children under seven were entitled to fresh milk, but fresh milk, like butter, cheese and other dairy products, is now off the shelves. Before the revolution, two litres of fresh milk cost 15 U.S. cents, well within the means of the poor.

Cuba, a country with a coffee culture, produces fine beans in its Oriente province, but not for average Cubans. The good stuff is sold to tourists and exported to earn dollars, or reserved for the Cuban elite, while the government imports cheaper beans, grinds them, mixes them with ground chickpeas, and doles out 28 grams per month -- less than one ounce -- to Cuban citizens. The government also exports high quality Cuban rice for dollars while importing a low-grade rice from Vietnam for its citizens. It exports 90% of its fresh fruits, directing much of the rest to tourists and others who can pay in dollars.

Nowhere in the world does the Almighty Buck more separate the haves from the have-nots. The Cuban government has adopted the U.S. dollar as an official currency that co-exists along with the peso and cleverly keeps the poor in their place. The multinationals operating in the country -- Cuba now courts them to earn dollars -- are forbidden to pay their Cuban workers directly in dollars. Instead, they must turn over the workers' wages to a government agency which pockets most of the money and gives the workers a pittance in pesos. Cuba's communists have perfected the Double Currency Standard, and the double standard: One currency for the rich, another for the poor, and the rich determine the means of exchange.

Cuba's poor are also squeezed in the other necessities of life. Even in central Havana, people commonly carry water by bucket from standpipes in the street to their homes, and then lift the buckets by rope to the higher floors, because their buildings' broken water pipes go unrepaired. Those lucky enough to have working water pipes can get water at the tap -- but only at certain times. In one dense urban neighbourhood that I visited, the water flowed from 7 p.m. to 10 p.m., during which time families scrambled to fill pots and pans inside their homes for drinking water, and former oil drums outside their homes for washing. About the time that the water came on, the electricity went off -- it, too, is rationed by daily blackouts.

In buildings where one or two families might have once lived, today live many. The inner courtyards of Cuba's residences have become miniature shanty towns, cinder block housing units or other improvisations piled on top of one another. The units -- often two small rooms totalling 200 square feet -- can house an extended family of seven, 10 or even 12. The rooms are often windowless or near-windowless, the ceilings low and oppressive. Among these buildings packed with people lie many identical buildings, but appropriated for government use. In the space that might house 50 or 100 people will sit one government functionary, bored and idle at a desk, the premises otherwise near-empty.

"For the first time in the history of our country, both the state and the government left aside the rich side and joined the poor side," Fidel Castro proclaimed after assuming power in 1959. Forty-four years after the Revolution, the poor side are talking of another revolution, in which the government will do much, much more for its people by doing much, much less.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation. E-mail: LawrenceSolomon@nextcity.com

© Copyright 2003 National Post



To: afrayem onigwecher who wrote (10922)1/14/2003 1:39:15 PM
From: StockDung  Read Replies (1) | Respond to of 19428
 
Heartland, Brokers to Pay $70 Mln to Settle Charges (Update1)
By Neil Roland

Washington, Jan. 14 (Bloomberg) -- Heartland Securities Corp., a day trading firm, and six brokers with its predecessor firm, Datek Securities Corp., agreed to pay $70.2 million to settle securities fraud charges filed by regulators.

The Securities and Exchange Commission alleged that Sheldon Maschler, Erik Maschler, Jeffrey Citron, and Michael McCarty executed millions of illegal proprietary trades on the Nasdaq Stock Market's Small Order Execution System. The defendants hid their fraud from 1993 to 2001 by creating fictitious books and filing false regulatory reports, the SEC said.

The charges stem from day traders' exploitation of an automated Nasdaq system designed in the 1980s to give small traders an opportunity to trade on a level playing field with large brokerages. Nasdaq changed the SOES system following abuses by day traders, many of whom were professional traders who exploited moment-to-moment stock movements during the market boom of the late 1990s.

``Today's action and hard-hitting penalties reinforce the high degree of integrity required of broker-dealers and persons associated with them,'' said associate SEC enforcement director Antonia Chion.

A year ago, Datek Online Holdings Corp., formerly Datek Securities, agreed to pay a $6.3 million fine on similar charges.

Sheldon Maschler agreed to pay $29.2 million in penalties and Citron $22.5 million, among the largest regulatory penalties ever assessed against individuals, the SEC said. They, as well as Erik Maschler and McCarty, orchestrated the scheme, according to the SEC.

Other brokers who agreed today to pay fines were Aaron Elbogen, formerly Datek Securities' chief executive officer, and Moishe Zelcer, formerly Datek's chief compliance officer, the SEC said.

Heartland bought Datek Securities' day-trading business in 1998.



To: afrayem onigwecher who wrote (10922)1/16/2003 1:18:59 PM
From: StockDung  Respond to of 19428
 
"In fact, Richmond and Premier have been operating a "prime-bank" scheme and are misappropriating investor funds and using the funds for, among other things: (1) Richmond's personal expenses, including limousines, armed guards and a down payment on a $1.5 million house in Encino, California; (2) working capital for Premier Pictures, a company owned by Richmond that produced adult films and operated an adult website; (3) other failed business ventures of Richmond, including a forfeited deposit made in connection with the aborted purchase of a male strip club; and (4) the operational costs of maintaining Premier's fraudulent scheme, including office rental and employee salaries. In addition, although investor funds did not generate any income, Richmond and Premier paid purported profits, interest payments and fees to certain individuals in an attempt to perpetuate a Ponzi-like scheme to enable Richmond to continue to raise funds from unwary investors."

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17936 / January 15, 2003
SECURITIES AND EXCHANGE COMMISSION v. PREMIER MARKETING AND INVESTMENTS, INC. and NICHOLAS ROBLEE a/k/a NICHOLAS RICHMOND, Civil Action No. CV-03-0342 RGK (JTLx) (C.D. Cal.)

The Securities and Exchange Commission ("Commission") announced that on January 15, 2003, the Honorable R. Gary Klausner, United States District Judge for the Central District of California, issued a temporary restraining order halting an ongoing $4.5 million securities fraud by Nicholas Roblee a/k/a Nicholas Richmond ("Richmond"), a 34 year-old resident of Encino, California, and Premier Marketing and Investments, Inc. ("Premier"), an entity controlled by him that has its principal place of business in Los Angeles. The Court: (1) granted the Commission's application for a temporary restraining order; (2) placed a freeze on the defendants' assets; (3) prohibited the destruction of documents by the defendants; (4) ordered accountings from the defendants; and (5) granted expedited discovery.

The Commission's complaint, filed yesterday, alleges that, since November 2000, Richmond and Premier have raised at least $4.5 million from dozens of investors in at least eight states, purportedly for the purpose of investing in a variety of "high-yield" investment programs. The defendants represented that investors could earn returns of up to 200% per month through the programs, which included high-yield promissory notes, bridge loans and the purchase and sale of precious metals. In fact, Richmond and Premier have been operating a "prime-bank" scheme and are misappropriating investor funds and using the funds for, among other things: (1) Richmond's personal expenses, including limousines, armed guards and a down payment on a $1.5 million house in Encino, California; (2) working capital for Premier Pictures, a company owned by Richmond that produced adult films and operated an adult website; (3) other failed business ventures of Richmond, including a forfeited deposit made in connection with the aborted purchase of a male strip club; and (4) the operational costs of maintaining Premier's fraudulent scheme, including office rental and employee salaries. In addition, although investor funds did not generate any income, Richmond and Premier paid purported profits, interest payments and fees to certain individuals in an attempt to perpetuate a Ponzi-like scheme to enable Richmond to continue to raise funds from unwary investors.

The Commission obtained an order temporarily restraining Richmond and Premier from committing securities fraud in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The order also temporarily restrained Richmond and Premier from committing violations of the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The Court ordered the temporary restraining order and asset freeze to remain in effect until January 25, 2003 at 1 p.m., pending a hearing on the Commission's motion for a preliminary injunction, which is scheduled for January 23, 2003 at 9 a.m. In addition to the interim relief granted today, the Commission seeks a final judgment against Richmond and Premier enjoining them from future violations of the foregoing registration and antifraud provisions, ordering them to disgorge all ill-gotten gains, and assessing civil penalties against them.

For more information on prime bank fraud, investors are advised to access the Commission's "Prime Bank" investor alert that provides tips on how to avoid being a victim of these scams. The investor alert can be found on the Commission's web site, at www.sec.gov/divisions/enforce/primebank.shtml.



sec.gov

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To: afrayem onigwecher who wrote (10922)1/16/2003 9:13:38 PM
From: StockDung  Respond to of 19428
 
SOON YOU WILL HAVE NO PLACE TO HIDE ISAAC->SEC wins $58.12-million (U.S.) fine on Canadian Waage

2003-01-16 17:03 PT - Street Wire

Also (C-*BCSC) B.C. Securities Commission

by Brent Mudry

The United States Securities and Exchange Commission has won $58.12-million in penalties against Edmonton fraudster Alyn Richard Waage, the alleged mastermind of the Tri-West Investment Club prime bank scheme, and his offshore company Haarlem Universal Corp., based in Panama. (All figures are in U.S. dollars.) Mr. Waage, 56, has been ordered to pay disgorgement of $58-million raised through Haarlem in the Tri-West scheme, and a civil fine of $120,000.

The SEC announced this week that it the judgments were entered by Judge William Alsup of United States District Court in the Central District of California in San Francisco on Dec. 19. In a parallel criminal case, Mr. Waage was extradited that same day from Costa Rica, after a nine-month extradition battle.

"The commission thanks the governments of Canada and Latvia and the Federal Bureau of Investigation and United States Attorney for their assistance in the matter," states the SEC. The U.S. court was also assisted by authorities in Costa Rica, Panama and Mexico.

Mr. Waage and co-conspirator James Michael Webb, 40, of California, extradited the same day, were indicted Jan. 3 in a 24-count grand jury indictment in U.S. District Court for the Eastern District of California in Sacramento. The pair face fraud and money laundering charges in what the U.S. Department of Justice calls "one of the largest Internet investment frauds in the country."

Authorities claim the Tri-West scheme netted more than $60-million from 15,000 investors worldwide. Both men faces a potential of five years in prison on each of six mail and 10 wire fraud counts, and 20 years in prison for each of six money laundering counts and a money laundering conspiracy count.

Mr. Waage and Mr. Webb have been in custody since September, 2001, when they were arrested by the FBI in San Jose, Costa Rica, in co-operation with the offshore haven's national police. The SEC filed a civil complaint the same day against the pair and Mr. Waage's sister Lynn Waage Johnston. Mr. Waage's arrest in Costa Rica capped an extensive international investigation by the FBI, assisted by the RCMP and securities regulators, including the British Columbia Securities Commission.

Mr. Waage's Tri-West group, which operated through Haarlem Universal and other affiliates, used accounts and entities in at least seven offshore enclaves, including Costa Rica, Belize, Panama, Latvia, the Bahamas, Mexico and the Cayman Islands. Mr. Waage is believed to have run the Tri-West operation since June, 1999, soon after jumping bail on another fraud case in Canada.

In the Tri-West case, Mr. Waage's son, Cary Alyn Waage, 26, was arrested on Dec. 13, 2001, at Dallas International Airport, where he landed on U.S. soil en route from Canada to visit his father in jail in Costa Rica. The son, held without bail, pled guilty last April to one count each of mail fraud and conspiracy to commit money laundering, and awaits sentencing. His plea deal included an agreement to co-operate with authorities and to forfeit millions of dollars worth of ill-gotten assets, including properties in Mexico and Costa Rica, an $818,000 yacht, a $150,000 helicopter, numerous late-model vehicles and various bank accounts.



To: afrayem onigwecher who wrote (10922)1/17/2003 11:06:26 AM
From: StockDung  Respond to of 19428
 
S.E.C. v. Dale Carone, et al.

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17939 / January 16, 2003
S.E.C. v. Dale Carone, et al., Docket No. CV 03 374NM (FMOx) (USDC C.D. Cal.)

The Securities and Exchange Commission today charged LinkNet, Inc., LinkNet de America Latina, Ltd., Allen R. Johnson, Joseph W. Isaac and Dale R. Carone with the fraudulent offer and sale of unregistered securities of LinkNet and Latina. The complaint alleges the defendants conducted these offerings from August 1999 through October 2000 and raised approximately $17 million from investors by selling the stock through a boiler room established by Johnson, Isaac and Carone in Encino, California.

The complaint alleges that in making the offering the defendants failed to disclose the fact that at least $5.1 million, or thirty percent, of the offering proceeds were paid as commissions to the boiler room operations. It is also alleges that the defendants made false representations that: (1) a public offering of LinkNet stock was imminent; LinkNet's stock would shortly be listed on NASDAQ; investors could realize phenomenal returns on their investment in a short time; and LinkNet and Latina had contracts for the sale of long distance service in the United States and Mexico which would generate millions of dollars in revenue to the companies. The complaint also alleges that, while the offerings were ongoing, Isaac, Carone and Johnson also sold their personal shares of LinkNet and Latina stock through the Encino boiler room and by other means.

All of the defendants are charged with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. Johnson, Isaac and Carone are also charged with violations of Section 15(a) of the Exchange Act. The Complaint seeks a final judgment: (i) enjoining the defendants from future violations of the above-cited provisions, (ii) requiring an accounting and disgorgement of their ill-gotten gains, plus prejudgment interest; (iii) assessing civil penalties; (iv) barring Johnson from acting as an officer or director of any public company registered with the Commission; and (v) barring Johnson, Isaac and Carone from any future participation in an offering of penny stock.



sec.gov

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To: afrayem onigwecher who wrote (10922)1/18/2003 7:52:56 PM
From: StockDung  Respond to of 19428
 
GeneMax battles short sellers Says it's target of bold campaign

By PETER KENNEDY AND JOHN SAUNDERS

Monday, November 18, 2002 – Page B1

VANCOUVER and TORONTO -- It may be a bear rout, a short squeeze, a cornered market, a slick promotion or just a bunch of naked short sellers caught with their pants down, getting what they deserve.

Whatever it is, it pushed the stock market value of GeneMax Corp., a revenue-free hopeful in the anticancer field, as high as $312-million (U.S.) last week, with the battle between longs and shorts far from over.

GeneMax is an attempt to commercialize University of British Columbia drug research, folded into a Howe Street stock promotion and served up in a Nevada-registered shell. Its offices are in the border town of Blaine, Wash., 50 kilometres down Highway 99 from Vancouver.

Its stock, GMXX, trades on the OTC Bulletin Board, a lightly supervised U.S. over-the-counter market. It closed Friday at $13.01, down from an intraday high of $20.40 Thursday, but up from as little as $3.50 in July.

As a scientific venture, GeneMax boasts a stellar cast, including UBC microbiologist Wilfred Jefferies and former QLT Inc. president Julia Levy, chairwoman. As a stock, it bears the imprint of Vancouver promoter Brent Pierce, whose activities in British Columbia are restricted by a 15-year trading suspension imposed on him by the B.C. Securities Commission in 1993.

In one sense, it is a promoter's dream. There is just a sliver of free-trading stock, which means that any buying pressure has a powerful effect on the price.

More than 98 per cent of GeneMax's 15 million shares are tied up by pooling agreements or other trading restrictions.

It is also a magnet for short sellers -- people who bet against companies and their stocks -- because, despite promising technology, it faces many regulatory hurdles before it learns whether it has a saleable product.

By its own account, GeneMax is the target of one of the boldest shorting campaigns on record. It estimates that at least 1½ times its tiny tradeable float has been shorted into the market, weighing down the share price. It does not name the short sellers (there is no easy way to identify them) but accuses brokerage firms of abetting them in what it calls an illegal manipulation. The brokerage firms deny these allegations.

Through lawsuits it has filed against brokers on both sides of the border, GeneMax has written a new chapter in a theory that has raged through Internet chat rooms since the tech-stock bubble burst two years ago.

The topic is naked short selling, a practice said to have crushed countless companies and erased billions in market value. In the extreme form of the theory, faceless syndicates of shorts are blamed for much of the market's collapse. Canada is assigned special blame because Canadian short-selling rules are looser than those in the U.S., although the U.S. rules are by no means strict (see box).

Technically, a naked short is an ordinary speculative short seller, as distinct from a covered short who, for example, owns a convertible bond that could be used to obtain the shares being sold short.

The conspiracy theorists tend to use naked short to mean people who short without limit, without regard to market rules and with no plan to borrow or deliver stock until the price has been pounded to oblivion.

Along with a few other U.S. companies, GeneMax has opted out of the brokerage industry's electronic book-entry system and now demands paper certificates for changes of share ownership. The plan is to squeeze the shorts, and it seems to be working, if only by spreading the idea that the share price has been artificially depressed by short selling and the tables are being turned.

Orchestrating this effort Investor Communications International Inc., which plays multiple roles in the GeneMax story as part owner, communications adviser and midwife in the deal that took the company public this past summer through a share swap with a moribund Nevada software maker. ICI and GeneMax have their headquarters in the same suite of offices in Blaine.

Mr. Pierce enters the picture through ICI, even if his exact role is unclear. His B.C. trading ban, a matter unrelated to ICI or GeneMax, was imposed after he acknowledged that some of the money raised in an initial share offering by a company called Bu-Max Gold Corp. was diverted to a private company he controlled and applied to his benefit.

He signed a document 2½ years ago filed with the U.S. Securities and Exchange Commission listing himself as ICI's sole shareholder. The firm recently sent a letter to newspapers suggesting that this is no longer true, but it did not reveal the current ownership. ICI officials did not respond to repeated phone calls last week.

GeneMax president Ronald Handford understands he is dealing with Mr. Pierce. "We think he is doing a very good job," Mr. Handford, a former banker and mining-exploration company president, said in Vancouver. He stressed that although ICI handles "the markets and public awareness side of things," GeneMax is in charge of its own destiny.
Short sellers hope prices drop

Short sellers aim to buy low and sell high, but not in that order. They sell shares they don't own now (they are short of these shares) in hopes of buying them cheaper later.

They may fill the gap by borrowing shares to make delivery, but sometimes they simply stall, exploiting quirks in a trading system that has largely replaced paper certificates with electronic book entries. When the system catches up to them and forces them to buy or borrow stock, they can always short some more.

Either way, a short sale creates what amounts to a pretend share. If the short seller borrows a share to make delivery, there are two people who think they own it: the buyer and the person whose share was borrowed.

Neither is likely to be aware of that fact. Standard customer agreements give brokers carte blanche to earn fees by lending out shares held in margin accounts, meaning the accounts of clients who buy securities partly on credit.

In a heavily shorted stock, the short position can grow to equal or exceed the number of margined shares available for borrowing. Persistent short selling tends to depress market prices, sometimes to zero.

None of this is necessarily illegal. The basic rule in Canada is that every short sale must be declared as such. The U.S. rule goes further, requiring players to make an "affirmative determination" that stock is available for borrowing at the time of the sale.

In neither country is it a crime to fail to deliver promptly on the settlement date, three business day later. The U.S. rule makes it hard for Americans to keep shorting an impossible-to-borrow stock. Canadians face no such restriction, although shorting a stock in tight supply is particularly risky.

When short sellers are wrong and prices rise, their losses can be almost unlimited. At some point, they must buy their way out at whatever price the market demands.
Staff

globeandmail.com