COMPANIES OFF SHO LIST, YET NO SHORT SQUEEZE OR POP IN UTAH STOCKS.
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StockGate: While Utah Law Is Debated, Some Evidence It Is Actually Working / FinancialWire®
June 15, 2006 (FinancialWire) When Utah Governor Jon Huntsman, Jr. signed a new law that allos Utah companies on the Regulation SHO list to collect $10,000 per day from brokers who fail to alert the state securities commission within 24 hours as to how many shares on designated lists of short stocks they won't be able to deliver on time, it provoked outrage and industry threats to abandon the state.
June 15, 2006 (FinancialWire) When Utah Governor Jon Huntsman, Jr. signed a new law that allos Utah companies on the Regulation SHO list to collect $10,000 per day from brokers who fail to alert the state securities commission within 24 hours as to how many shares on designated lists of short stocks they won't be able to deliver on time, it provoked outrage and industry threats to abandon the state.
However, according to research conducted by Virginia Strang and made available exclusively to FinancialWire, there is evidence the law is “actually working,” as an astounding eleven companies believed to have qualifying Utah operations out of 20 previously on the Regulation SHO list, have “miraculously” dropped off the list in the past couple of weeks. These include Krispy Kreme Doughnuts (NYSE: KKD), which fell off the list May 31, CIT Group (NYSE: CITPR A), June 7; Carmike Cinemas (NASDAQ: CKEC), June 13; and Trans World Entertainment (NASDAQ: TWMC), June 12.
Other NYSE companies with Utah operations falling off the list include Fannie Mae (NYSE: FNMPRM), May 30; Huntsman Corp. (NYSE: HUNPR), June 5; and Morgan Stanley India Investment Fund (NYSE: IFF), June 6.
Nasdaq companies falling off the list include Schlotzsky’s Deli (NASDAQ: BUNZQ), June 5; Ensurge (NASDAQ: ESGIE), June 2; CitiGroup Global Markets (NASDAQ: PDYXN), June 2; and IMAX Corp. (NASDAQ: IMAX), June 7.
Remaining on Regulation SHO are:
Merrill Lynch ARN (NASDAQ: ARNQ), Merrill Lynch MITTS (NASDAQ: DWMT), Ascend Acquisition Corp. (NASDAQ: ASAQU); Lightpath Technologies (NASDAQ: LPTH); Movie Gallery Inc. (NASDAQ: MOVI); Overstock.com (NASDAQ: OSTK); Sharper Image (NASDAQ: SHRP);
Amerco (NYSE: AOPRA); and La-Z-Boy Inc. (NYSE: LZB).
The law is at le.state.ut.us
"We felt this law is good for business - particularly for small and mid-cap companies - and for consumers," Michael Mower, a spokesman for the Republican governor, told Dow Jones.
According to the Dow Jones Newswires, the Securities Industry Association, Wall Street's principal trade group, hired former Utah banking commissioner George Sutton to lobby against the bill.
"Some firms may refuse to allow their customers to purchase or sell the securities of a company domiciled in Utah," Steve Judge, government affairs senior vice president at the SIA, wrote in the letter. Brokerage firms that make markets in stocks - ensuring that investors can easily buy or sell shares and helping companies raise capital - may curtail that activity, Dow Jones said the letter stated, noting it also cited the National Securities Markets Improvement Act of 1996, which prohibits states from imposing operational and record-keeping requirements that aren't required by federal securities law.
"I'm glad to see Utah is taking this vanguard role," Byrne was quoted as saying. "And I predict this will make Utah the most attractive state for entrepreneurs and small companies in America."
Sponsoring Sen. Curtis Bramble, R-Provo, was quoted as saying he is uncertain how effective the law will be outside of Utah. But he hopes other states - and the federal government - will follow suit. "This is a problem that exists for all of Utah's publicly held companies when these 'bad actors' engage in illegal naked short selling."
Utah Securities Director Wayne Klein said his division is engaged in "gathering information from the industry about short selling practices to determine whether violations are occurring now and, if so, what enforcement actions should be taken."
The North American Securities Industry Association has formed a task force headed by immediate past president Ralph Lambiase of Connecticut, and it is believed the task force has issued numerous subpeonaes to the Depository Trust and Clearing Corp., a massive national clearing house jointly owned by self-regulatory-organizations NASD and New York Stock Exchange, which some have accused of overstepping its powers and exasperating the naked short selling scandal through its “stock borrow” program. The DTCC denies this but has admitted that fails to deliver, while representing only a “tiny fraction” of daily transactions, adds up to $6 billion a day, an amount that improperly used by an unscrupulous brokerage or hedge fund, could devastate hundreds of the 70% of companies that are considered by the SEC to be a “smaller public company.”
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