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To: Jeffrey S. Mitchell who wrote (4104)	1/24/2003 4:49:22 PM
From: Jeffrey S. Mitchell	Read Replies (2) \| Respond to of 12465

Re: 1/24/03 - Dow Jones: (DTC will not relinquish control of companies for the purpose of moving to physical delivery of stock) NEW YORK (Dow Jones)--A tool some small companies have used to make it difficult for investors to short their stock has just been taken away. The Depositary Trust & Clearing Corp. (DTCC) has decided companies that clear and settle through it cannot exit DTC's global electronic system for the purpose of moving to physical delivery of stock. After allowing six development stage companies to exit its electronic clearing and settlement system, the DTCC said that shareholders, not issuers, have the right to determine how to hold securities, in electronic form or physical form. Actually having to deliver stock certificates between buyers and sellers would make short selling difficult, if not impossible. The decision by DTCC is sure to anger a dozen or so small companies that have said they want to exit the electronic clearing system, known as book entry. These companies say they want to revert to using physical stock certificates in order to fight what they call illegal short selling of their stocks. But DTCC said that, after consulting with the Securities and Exchange Commission, it will not allow any more companies to exit its stock clearing system managed by one of its subsidiaries, DTC. "If the shareholders of any company wish to have their shares withdrawn from DTC and hold them in certificated form, they should submit that request to their broker and when that request is forwarded to DTC, it will be handled in the ordinary course of business in accordance with DTC's procedures," DTCC said in a statement to Dow Jones Newswires. "DTC does not have any procedures for acting upon withdrawal requests by issuers," DTCC said in the statement, adding that the "Uniform Commercial Code provides that it is the shareholder that has a right to determine how his or her shares should be registered, not the issuer." Following an "In the Money" column on the subject, several companies last week insisted that they companies had a right to exit DTC. "A group of (Over The Counter) Bulletin Board listed companies that have exited the DTC system and have subsequently been the target of a media campaign that questions the validity and legality of the procedure have jointly confirmed the precedence for the use of this method and support by all governing bodies concerned," Investor Communications International, or ICI, said in a press release. ICI represents at least six publicly traded companies that have either exited, or said they would exit, DTC, including GeneMax Corp. (GMXX) of Blaine, Wash. GeneMax has been the subject of three other "In the Money" columns. Those columns questioned whether insiders would benefit most from limits on short selling and GeneMax's connection to consultant ICI. The move by some small companies to exit DTC contrasted sharply with global efforts to streamline securities trades clearing and settlement and do away with some of the costs associated with paper certificates. A spokesman for Wall Street's main trade group, the Securities Industry Association, said last week that the securities industry "is trying to move away from certificates all together." In fact, the SIA is launching a publicity blitz this year to do away with paper stock certificates. So far, one company, AT&T Corp. (T) has dropped paper certificates all together. A spokesman for the SEC declined to comment Friday on DTC's decision not to allow companies to exit its electronic clearing system. But asked whether the SEC was concerned about the recent moves out of DTC, SEC spokesman John Heine said earlier this week that the SEC is "concerned with any trend that runs counter to immobilization and dematerialization," two words used to describe the move to electronic clearing of securities. Companies looking to exit DTC all blame short sellers for their depressed stocks. Short sellers sell borrowed securities in the hope of replacing them later at a lower price. Short selling is generally limited by the ability of borrowing a stock at the time of the sale. That rule, known as affirmative determination, limits the ability of investors to short the stock of companies with small amount of free trading shares since their stock is often difficult to borrow. Only shares held in margin accounts can be loaned out. Shares held in cash accounts cannot be loaned out. The DTCC insisted in a statement to Dow Jones that the companies' claim that the move out of DTC helps fighting short selling is without merit. "The rules governing short selling are the same in a physical environment as they are in a book-entry environment. Moving to physical securities does not inhibit short selling in any way," DTCC said in its statement. Companies that have officially made the move out of the DTC system are: GeneMax; Ten Stix Inc. (TNTI); BlueBook International Holding Co. (BBIC); MidasTrade.com (MIDS); MSM Jewelry Corp. (MSMJ) and Make Your Move Inc. (MKMV). In addition the following companies have said that they would exit, or that they were considering exiting DTC: Reeds Holdings Corp. (RDHC); Nutra Pharma Corp. (NPHC); Critical Home Care Inc. (CCLH); Hadro Resources Inc. (HDRS); Jag Media Holdings Inc. (JGMHA); InternationalBioChemical Industries Inc. (IBCL); SunComm Technologies Inc. (STEH); Bentley Communications Corp. (BTLY); Nutek Inc. (NUTK); ITIS Holding (ITHH) ; FreeStar (FSTI) and Sionix (SINX). By Carol S. Remond; Dow Jones News; 201 938 2074; carol.remond@dowjones.com

To: Jeffrey S. Mitchell who wrote (4104)	5/23/2003 8:49:12 AM
From: Jeffrey S. Mitchell	Read Replies (4) \| Respond to of 12465

Re: 5/18/03 - [JGMHA] NY Post: Street Brokers' Shorts May Be Dropping in Suit STREET BROKERS' SHORTS MAY BE DROPPING IN SUIT By GREGG WIRTH -------------------------------------------------------------------------------- [Picture of penny stock trading floor (sic)] PENNY SHOCK: Almost 100 penny stock companies claim that they are the victims of naked short selling being facilitated by the big brokerage firms. The taking of a short position without first borrowing the stock is at issue. - Getty Images May 18, 2003 -- Gary Valinoti had a crazy idea in the late 1990s - create a broadcast channel to compete with CNBC. It turned into his worst nightmare. Valinoti, CEO of Jag Media Holdings, which runs stock-market Web site JagNotes.com, now may be creating a nightmare for the Street's largest brokerages and settlement firms. Almost 100 penny stock companies - Jag Media included - have claimed that in the past that they are the victims of naked short selling, which is being facilitated by the big brokerage firms: the taking of a short position without first borrowing the stock. Owners of the penny stocks claim brokerages are lending shares that don't exist to short sellers, who in turn are driving down the companies' stock prices. Many have ordered trading in their stocks to be done through "certificate only" trading, meaning that to trade or short the stock, the brokerages must obtain the actual stock certificate. Valinoti' going a step further: Jag Media filed a lawsuit last summer in District Court in Harris County, Texas, that accused more than 150 of Wall Street's biggest brokerages of improperly closing short trades and failing to identify borrowed shares. The defending brokerAges - including Merrill Lynch, and units of J.P Morgan and Goldman Sachs - have sought dismissal of the Texas lawsuit, and the judge is expected to make a decision shortly. To press the issue, Jag Media announced a special dividend in mid-March, but available only to those shareholders who could produce their stock certificates. "We just wanted the brokerage firms to open their books and show us who owns our stock," Valinoti said. The announcement sent shareholders to their brokers, who in turn went to the depository trust companies, both here and in Canada, that house all companies' stock certificates in this age of computer transfer. Jag Media tried this ploy before, sending shareholders scurrying for their certificates. And like before, the result confirmed suspicions. Many brokerages didn't have the certificates. Instead they just had IOUs for them, mostly from other brokerages and settlement firms. A.G. Edwards, UBS PaineWebber, Spear Leeds (the settlement unit of Goldman Sachs) and several others came up short in the number of stock certificates shareholders were asking for, according to several e-mails between Jag Media and a number of brokerages, which were made available to The Post. In an April 17 e-mail to Jag Media, A.G. Edwards reported a 520,000 share shortfall in the number of Jag Media certificates it had on hand. The firm blamed the depository trusts and other brokerages for not being able to locate the certificates. "I have spoken to other firms and they are having the same problems that we have due to other firms also owing the shares," the e-mail stated. A.G. Edwards refused to comment on the situation. Several e-mails also indicated Spear Leeds was facing a similar shortfall. A Goldman Sachs spokesman said the firm resubmitted its certificate requests to the depository trusts on Thursday and is awaiting delivery. Given these shortfalls and the short interest in Jag Media stock, which Valinoti estimates is five times its 37 million outstanding shares, it appeared firms were trading shares without eventually establishing ownership via the stock certificates - a violation of regulatory requirements. "Naked short sellers are destroying [us], and I caught them," Valinoti said, adding that if the big brokerages are allowing naked short selling to happen, they are leaving themselves on the hook for shares they can't produce. "If that happens, the entire settlement system is going to collapse." His suggestion? Force the brokerages to buy the missing shares - a solution that could inflate the stock prices of many penny stocks, including Jag Media. Now that sounds like a dream. Copyright 2003 NYP Holdings, Inc. All rights reserved. nypost.com