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Microcap & Penny Stocks : Rocky Mountain Int'l (OTC:RMIL former OTC:OVIS) -- Ignore unavailable to you. Want to Upgrade?

To: Riley G who wrote (28144)	12/16/1997 3:56:00 PM
From: specsit	Read Replies (4) \| Respond to of 55532

Havent you posted this about a thousand times ? I see a DIRECT correlation between you posting this and that stock price declining. Isnt that nifty. Oh and why would a millionaire like yourself even bother with a pipsqueak stock like this. Just take James Randi up on his offer and make another cool million. I, like James Randi, believe anyone that says they have supernatural powers is a fake. Therefore, any stock you seem to like would cause me to STAY AWAY ! Color me rational.

To: Riley G who wrote (28144)	2/4/1998 9:39:00 PM
From: Arcane Lore	Respond to of 55532

Complaints to regulatory agencies haven't stopped the practice of undeclared short selling. Illegal Naked Short Selling by Market Makers: To All: I have recently spent some time at the SEC web site searching their extensive collection of enforcement cases. There were plenty of actions brought by SEC for a whole litany of wrongdoing - Ponzi schemes, fraud, misappropriation of funds, selling of unregistered shares by company insiders and/or boiler room operations, excessive markups/markdowns by broker/dealers, market manipulations by market makers, broker/dealers and/or private citizens, etc. However, despite the presence of enforcement actions against market makers, I found no cases brought against market makers involved in illegal naked short sales, let alone short situations similar to the supposedly huge illegal naked short position which has been asserted for RMIL (alleged naked short position > total public float maintained for an extended period of time [5+ months]). It's certainly possible that I could have missed seeing these cases even though they were there to be found. Thus my question/request: Can anyone post a URL describing at least one civil or criminal enforcement action brought by SEC against a market maker for a naked short position? It would seem that this would be a fairly simple violation for the SEC to identify and pursue. They have the authority to examine the trading records of suspected market makers. Even if those records were inadequate or unavailable for any reason, SEC could still investigate via the DTC/TA. One technicality to be avoided by anyone who undertakes to find such a case - As mentioned above there are plenty of enforcement actions against company insiders and boiler rooms for selling unregistered shares. I suppose this could be regarded as technically being a form of illegal naked short sale (though these cases involve real but unregistered shares not 'virtual' shares). Clearly any attempted short squeeze in such a case is futile and would likely only bring forth even more unregistered shares (In the words of a potato chip vendor: "Eat all you want, we'll make more"). These cases are of no interest to me - I've already located plenty of them. It is my understanding that market makers can legally short the stocks in which they make a market if they have none currently in inventory. The illegal aspects, if any, of their activities would therefore appear to come into play only in the maintenance not the initiation of a naked short position. To maintain the short position, the short market maker would appear to have only three options at settlement time: (1) Buy in the shares. (2) Borrow the shares for delivery to the purchaser(s). (3) Fail to deliver the shares (forever??) using some sort of maneuver. I have found no SEC cases involving perpetual 'failure to deliver' on the short side. Interestingly, I did find one case on the long side where the defendant, a private citizen - not a market maker, attempted to maintain a partially 'virtual' long position by a process similar to check kiting. See: sec.gov Do market makers indulge in misconduct and does SEC go after them when they do? Here's a link, which gives 100 million reasons why the answer to both these questions is 'yes': sec.gov (Though in this case, as in a number of other cases, the penalty arguably was relatively mild.) If there were illegal naked short selling going on, would SEC go after it? Of that I have no doubt. But I'm still waiting to find a SEC enforcement action against a market maker involved in illegal naked short selling. P.S. A companion post will address the corresponding absence of SEC enforcement actions against illegal offshore naked short sales.

To: Riley G who wrote (28144)	2/4/1998 9:40:00 PM
From: Arcane Lore	Respond to of 55532

Complaints to regulatory agencies haven't stopped the practice of undeclared short selling. Illegal Ex-U.S. Naked Short Selling To All: As with the corresponding market maker naked short selling, I can find no SEC enforcement actions against such activities. I suppose it is obvious that enforcement against such shenanigans, if they exist, is substantially more difficult than it would be if the misconduct did not have ex-U.S. aspects. Nonetheless, the SEC can and does bring enforcement actions even in cases one might expect would be extremely difficult to pursue. The Dennis Levine insider trading scandal of the last decade is a case in point. Levine was doing his trading via secret accounts in the Bahamas. Despite the obstacles of Bahamian banking secrecy and the extreme care with which Levine protected the secrecy of his trades, he was successfully caught and prosecuted (though the SEC is among the first to admit they were lucky in the less cooperative international regulatory environment of the 80's). Since the time of the Levine case, the U.S. has negotiated a substantial number of memoranda of understanding (MOUs) with the regulatory authorities of various countries (including Canada) to simplify bringing enforcement actions in ex-U.S. situations. Even in the case of countries for which there is no MOU, SEC is often able to get the necessary cooperation through less formal means. Further details are in the Senate testimony of Michael D. Mann in: gwjapan.org (Warning: It's long - search for the third occurrence of the string 'mann') As a result, one can find a reasonably large number of enforcement actions involving ex-U.S. aspects. For example here's a recent one involving alleged money laundering through a number of banks worldwide (Angel D: there's that 'l' word again<g>) sec.gov As noted above, despite the increased ease with which actions against ex-U,S, misconduct can be brought, I can find no cases involving naked ex-U.S. short selling described on the SEC web site. Of course, as noted in my previous post, I may have missed one or more such cases. Can anyone post a URL describing at least one civil or criminal enforcement action brought by SEC for a naked ex-U.S. short position?* A few further observations: Even if the ex-U.S. trading records of the shorter were unobtainable by the SEC, the TA/DTC records might suffice. In addition, I am still unclear on how an ex-U.S. naked short can evade a 'failure to deliver' at settlement time. Not withstanding the fact that from the standpoint of a Canadian brokerage, it suffices to leave a 200% deposit in lieu of borrowed shares, at the time of settlement in the U.S., the TA/DTC/brokerage of the seller would presumably expect one share delivered for each share sold. However, if I'm mistaken then, leaving aside a 'failure to deliver' the Canadian naked short seller has three options at settlement: (1) buy in the shares (2) borrow the shares (3) maintain the required margin in his account If option 3 is a viable alternative (and, again, I don't understand how that is possible) then it would seem to make no difference whether the purchaser has put his shares in NAME form or in street name. To put it another way, putting shares in NAME form reduces the number of shares available for borrowing. It would seem to have no effect on shares that are somehow delivered by virtue of a 200% margin deposit in a Canadian or other ex-U.S. brokerage account. As with illegal market maker naked short selling, I have no doubt SEC would pursue the perpetrators. In at least some cases, I would expect some of these investigations would result in enforcement cases. If there are no such cases then ... ===== * It's conceivable that the misconduct by the GFL Ultra Fund (discussed previously on this thread) included naked short selling. However, the only example given of the fund's tactics (Zeitel) makes no mention of whether the 'short' end of the transaction designed to evade registration of regulation S shares was naked. Presumably if the short end of the GLF maneuver was illegal/naked this would have been mentioned in the description of the case. See: sec.gov