Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Angel D who wrote (45198)	4/8/1998 8:23:00 PM
From: s martin	Read Replies (1) \| Respond to of 55532

Who paid for the boat? The shareholders? <G>

To: Angel D who wrote (45198)	4/8/1998 11:38:00 PM
From: TopCat	Respond to of 55532

Angel, Great post! >>>How about, to start, would we be in trouble if we went down to Miami and simply beat the crap out of Gary and Roland?<<< Had me, as they say, rolling on the floor, laughing my......, etc. TC

To: Angel D who wrote (45198)	4/9/1998 2:53:00 PM
From: Mr. Dendro	Read Replies (3) \| Respond to of 55532

I've been reviewing the case law on naked short selling and what I found was surprising. Apparently, there are no laws or regulations that prevent market makers from selling shares they don't own. In the one case I found that addresses short selling of penny stocks, a market maker sold short 170 million shares of a company that only had 122 million shares outstanding. At trial, the market maker admitted he had no intention of delivering any of the stock that he sold short. When buy orders came in, the MM discouraged them by selling short more and more stock. The court found that the MM had not violated any federal law or regulation, and that he had not violated the rights of the shareholders because they had no reasonable basis for believing "that the number of shares of a stock that is being sold short does not exceed the total number of shares in existence"! In other words, because there are no laws prohibiting naked short selling, the shareholders "could not count on the volume of short sales being capped at the total number of shares outstanding." The court even noted that naked short selling served a legitimate purpose by helping to move the market price toward the true value of the stock. Admittedly, the case had unique circumstances, since it addressed short selling in the face of bankruptcy proceedings and the pending re-issuance of new, lower-valued stock, but it does establish the general principle that naked short selling is in and of itself not illegal. Other cases suggest that naked short selling, when part of a broader scheme by MMs to manipulate market price, is illegal under Section 10b (which prohibits the "use or employment, in connection with the purchase or sale of any security . . . of any manipulative of deceptive contrivance"). For anyone interested in the case discussed above, it is Sullivan & Long v. Scattered Corporation, 47 F.3d 857 (7th Cir. 1994).