SEC Preparing Rules Against Manipulative Short Sales (Update1Submitted by SIERRAHPBT on Mon, 09/15/2008 - 21:38
some of you say that there is no silver manipulation??
then why is sec preparing these rules? they are not making this for the silver market.. that is because huge banks who are in the good ole boys club are the ones doing the manipulation!.................................................................................
SEC Preparing Rules Against Manipulative Short Sales (Update1)
By Jesse Westbrook and Edgar Ortega
Sept. 15 (Bloomberg) -- The U.S. Securities and Exchange Commission will likely stiffen rules targeting manipulative short selling after a stock-market rout triggered the bankruptcy of Lehman Brothers Holdings Inc., a person familiar with the matter said.
The SEC may strengthen rules this week by requiring brokers to deliver shares that have been sold short, according to the person, who declined to be identified because the plans aren't complete. The SEC also will consider it securities fraud when short sellers deceive brokers about their intention to deliver shares to buyers, the person said.
The SEC doesn't plan to revive an ``emergency'' order that expired last month aimed at curtailing so-called naked short- selling in Lehman, Fannie Mae, Freddie Mac and 16 securities firms. The rule required investors betting on a decline in stock prices to arrange to borrow the shares before completing a sale.
``The emergency order was mostly a symbolic action,'' said James Angel, a finance professor at Georgetown University in Washington who studies short-selling. ``I see no evidence that there was rampant naked short-selling in those particular stocks.''
SEC spokesman John Heine declined to comment.
Lehman, facing losses from mortgage holdings, today filed a record Chapter 11 bankruptcy petition in Manhattan, declaring more than $613 billion of debt. The decision came after Lehman shares slid 77 percent last week in New York Stock Exchange composite trading and Barclays Plc and Bank of America Corp. abandoned talks to buy the New York-based securities firm.
The new rules may eliminate an exemption that options market makers had from delivering shares of companies placed on so-called threshold lists. Companies are listed when they have a high number of borrowed shares that have not been delivered.
The SEC may also shorten the time brokers have before they must step in and buy a company's stock to clear a short sale. For companies on the threshold list, the SEC mandates that brokers act after 13 days.
The changes target naked short selling, in which traders never borrow shares. The SEC is concerned manipulative investors may use the sales, which are legal in some circumstances, to drive down prices by flooding the market with orders to sell shares they don't have.
In traditional short sales, traders borrow shares that they sell. If the price drops, they profit by buying back the stock, repaying the loan and pocketing the difference.
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