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The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 1/17/2006 9:14 PM

 Alan Newman, a prominent market analyst and commentator, and publisher of Alan Newman’s Crosscurrents newsletter, took his own trip down the rabbit hole this summer when he submitted a FOIA request for data on OSTK – specifically for data that is by now over 6 months old.

 

His request? 

 

He wanted to know what the total number of FTDs were for OSTK as of August 1, 2005.

 

He wanted this to see whether we were all out of our minds or not, and figured that there was no sane or good reason for not supplying data so old and stale as to be of no consequence to anyone, from a competitive standpoint - i.e. that the SEC couldn't use their old standby that the data could endanger trading secrets of current participants gaming...er...trading the stock.

 

His first letter to the SEC, requesting the data, can be viewed here.

 

The SEC’s response can be viewed here.

 

After some investigation and a subsequent denial, the SEC's final response can be viewed here.

 

And his appeal based upon the data being stale, and thus their reason for denying it no longer valid, can be seen here.

 

This is a guy who wants old data, and yet the reason cited for refusal is because it could cause competitive issues – how, you might ask, could now 6 month old (or 3 month old at the time of the letters) data cause competitive issues? Fair question. The SEC doesn’t say. It just wants to keep any data secret.

 

Folks, on one side of this issue we have polite folks making reasonable requests for the most elemental and essential transparency. On the other we have secrecy, stonewalling, grandfathering of violations, rules with no penalties, vitriol, attacks, character assassination and ad hominem.

 

This illustrates handily what is wrong with our captured regulator – they are running interference for the bad guys versus doing their job. Simple.

 

And sickening.

 

Any questions?
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Comments (21)
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By bobo on 1/17/2006 9:50 PM
Anyone that is interested in what Tim Mullaney looks like, check out his picture here:

http://www.businessweek.com/images/viewpoint/mullaney.jpg

One of the webmasters just linked it.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By x. trapnell on 1/17/2006 10:45 PM
Mind-boggling stuff. It's tempting to make a similar request for NFI data for, say, January 2005 to see if a similarly ludicrous answer results.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By bobo on 1/17/2006 11:08 PM
Why don't you? And then send it to me, so we can collect the idiotic responses from the captured regulators...
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By financial_circus on 1/17/2006 11:15 PM
What did you expect? Unless there is a major unusual aberration that they have to allow the appreciation or decline to occur for all extensive purposes Wall Street controls the price action of a security. It is my belief that they not only determine a security's price but that they are also in collusion with each other as to what company survives or dies. I believe that there is a network that exists that determines the ultimate fate of a company. I base this on my personal experiences but I believe that this will be verified by others in the near future. Once a company is on the stricken list it becomes fair game to sell every share that can be sold legal or naked shorted knowing the outcome is not at risk. This can be demonstrated not only by the SHO list which by the way is a complete fraud and but by the many bankruptcies in the past including Worldcom and others. Take a look at the volume when they collapse a stock. They would be called for piling on in football. There is an unspoken rule that exists between the crooks that does not allow for exploitation at the other firms expense on these securities. This is evidenced daily by declining values and lack of exploitation of the SHO list. There is no other way to explain this activity in these stocks. Wall Street in the past has exploited every potential short squeeze but now they seem content to do nothing but to continue to run the prices down in conjunction with their competitors. In any other industry we call it fraud and price fixing. Here we call it grandfathering, SHO, non-disclosure, disallowing volatility to the upside and many other fabricated definitions. It is my personal belief that the security industry revolution is upon us and is not going to be pleasant. Ultimately what is about to happen will be beneficial to all investors in the long run but will not happen without a lot of continuing deception and pain for all. "LET THEM EAT CAKE" said the SEC. If I worked at the SEC in a position of responsibility I would RUN not walk from the organization NOW before the masses explode. I believe that not one but several to many security firms will be destroyed through this cleansing process unless the US Government bails them out at the Taxpayers Expense and allows the crooks to go free as they did in the Savings and Loan Crisis. I do envision a different ending this time best voiced by Madame Lafarge, who sat knitting triumphantly smug at the foot of the guillotine which lopped off one aristocratic head after the other ...shouting... the guillotine! the guillotine! Believe it-- we are on the brink.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By SN9 on 1/18/2006 12:57 AM
And when too many requests are made, they'll stamp it "Secret" and say it can't be released because it will affect "national security."

At the end of his speech Monday, Gore called for the People to rise up and defend the sanctity of our Constitution and Republic, to thunderous applause. It's an election year. File to run in the primary for your Congressional District so these issues of import are raised. It's politics time!
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Patchie on 1/18/2006 5:23 AM
Guys,

The real FOIA Data that would be of interest is the FTD's for the NYSE and NASDAQ in the 1999/2000/2001 timeframe. We already know by enforcement activities that this is certainly a period in which abuse was evident (Elgindy, Rhino, Shane, etc....) so how do the FTD's compare in a crashing market to todays flat market? That would be analysis that would be of tremendous value.

Remember the other thing here. The SEC has a window of 5-years to take an enforcement action; Statue of Limitations. We are now at a point where the 2001 fraud is being excused by the SEC and they are using the statue of limitations as the ultimate in "grandfather clauses".
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By mhelburn on 1/18/2006 5:30 AM
SN9

You are dead on. When a person has a valid platform, such as this could be, it will catch on and get a person elected. I realized this when my friend was running for office. Had she done the homework, she could have blown the other candidate out of the water. She was unfamiliar and didn't "get it". Presented properly, this wakes people up and anyone that can present the material coherently is considered brilliant, because it is complex....by design. But that is what we have to overcome.

It has been estimated that if 500 lawsuits were brought against the SEC, they would blow up because they couldn't handle it. This was discussed on CFRN.

If 500 people copied A.N.'s request and we document the requests, we will have something to present. If 500 people believe that there is a crime going on, and the SEC ignores it, they are not going to be able to defend their position when it comes out.

Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By bobo on 1/18/2006 6:59 AM
You know, something just occurred to me. We should be writing the governors of each state, asking them to rescind their endorsement of de-materialization, until the market is transparent enough so that paper certificates are not the only safeguard against the massive electronic counterfeiting and fraud that is the current state of affairs.

The reason the DTCC is in such a hurry to get that passed is because it eliminates the only mechanism by which a retail shareholder can verify delivery. As long as there is evidence of widespread naked short selling and complete opacity in the system, no elected official should condone the elimination of the life rafts from the titanic.

Start writing letters - if the SEC and the state regulators won't stop this, then the governors need to stand up and refuse to be complicit. Allowing a monopoly to eliminate the only safeguard for Main Street against that monopoly abusing its power is unconscionable in a world where FOIA requests are routinely abused (the rejection thereof) and the system is complicit in manipulation.

And send the letters to Letters@NCANS.net.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By edwardb_3 on 1/18/2006 7:25 AM
It looks as though the only way is a FOIA lawsuit against the SEC. WRT to state governors, try filing compaints with the Departments of Corporations emphasizing the damage to citizens of the individual states.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By mhelburn on 1/18/2006 9:02 AM
Boston Partners Asset Management's short sales and other acts were illegal, ABFS trustee claims.By Todd MasonInquirer Staff WriterA Boston hedge fund participated in an illegal scheme to drive down the share price of American Business Financial Services Inc., according to the bankruptcy trustee who is liquidating the former Philadelphia mortgage lender.
Boston Partners Asset Management L.L.C. sent anonymous letters and posted Internet comments in a "vicious pattern of conduct" to damage ABFS, Trustee George L. Miller alleged in a civil lawsuit filed Dec. 30 in federal court in Wilmington.
Cynthia Perl, a spokeswoman for Boston Partners' parent, Robeco Investment Management Inc., would not comment on the lawsuit.
The suit seeks unspecified compensatory and punitive damages, plus the profits that Boston Partners earned in short sales of ABFS stock. In a short sale, investors borrow shares and then sell them, hoping to replace them later at a lower price.
Miller's lawsuit alleges that Boston Partners made illegal "naked" short sales, in which nonexistent shares are sold to put pressure on the share price, even though the transaction ultimately falls through.
Boston Partners' broker had short positions in January 2001 amounting to 30 percent of ABFS shares available then to be bought and sold, the lawsuit alleges. Legitimate short positions of that magnitude are unlikely, the lawsuit says.
The pressure applied by shorting that many shares "would be huge," said Robert Shapiro, an economist in Washington who has studied naked shorting.
"You put in sell orders on 30 percent of a company's outstanding shares, it's going to drive down the share price," he said.
In addition, Boston Partners wrote anonymous letters to regulators, the news media, and ABFS's investment bankers alleging that the company was engaged in a pyramid scheme, according to Miller's lawsuit.
The bankers withdrew from a sale of securities in June 2003, triggering a cash crisis that ultimately claimed ABFS.
ABFS filed for bankruptcy protection last January owing $521.6 million to purchasers of unsecured investment notes and $98.1 million to investors who exchanged their unsecured notes for secured notes.
Miller hired a law firm last year to explore litigation against ABFS officers and directors, who are not blameless in his view.
"I wouldn't have hired counsel to investigate them if I thought they were pure victims," Miller said in an interview last week.
ABFS had maintained that it fully disclosed the risks involved in buying its notes.
Litigation is the only hope for unsecured creditors to collect a "significant distribution," Miller said. The liquidation process, slowed by difficult dealings with secured creditors, could take two years, Miller said.
Meanwhile, the trustee said he had fielded 8,800 calls and e-mails from concerned note holders. The volume of calls is a major drain on his time, Miller said. He said he was not able to tell callers any more than he has posted on his Web site, www.abfsonline. com.
"It is a very frustrating case," he said.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By n-tres-ted on 1/18/2006 9:15 AM
The states don't have jurisdiction to regulate money managers who manage more than $25 million. When the SEC has jurisdiction, ordinarily the state administrators do not. Do you know on what basis the NASAA intends to act?
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Willy the Gambler on 1/18/2006 10:37 AM
MEN LOVED DARKNESS RATHER THAN LIGHT, BECAUSE THEIR DEEDS WERE EVIL.


If what was going on was just and right, the SEC would have no good reason to be so opaque. This kind of thing - the darkness of the SEC- is what convinces me something pretty bad is going on in our capital markets with respect to the FTDs.


Government not being accountable to the public is a sure sign that democracy has a cancer. As Americans, we should all be doing what we can to cut it out before it gets worse.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Pervilis Nosthumus on 1/18/2006 12:44 PM
n-tres-ted,

That comment is a little opaque. If you mean 'can the state of Kentucky for example bring action against Bob's Investment Advisory if Bob's Investment advisory has no clients in Kentucky?' then perhaps not. If they file notice in the state, however, (meaning they have more than 5 clients in the state and/or have an office in the state) then states absolutely may bring action, regardless of registration with SEC.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Pervilis Nosthumus on 1/18/2006 12:48 PM
Incidentally, Bobo, just saw your post re: the NASD guy leaving for GDC. A couple of years ago, I did a fair amount of "Bankruptcy Investing" and GDC was a common name representing the filing company.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By rtway1 on 1/18/2006 3:00 PM
We sometimes take things for granted and need to take inventory of what we have, and what our potentionals are. We have a combination all great web sites, overflowing with knowledge and experience, a radio station who might well capture the ears of other electric media, and we have the charasmatic and well spoken CEO of a company know to almost all Americans and probably many other countries. The most important thing we have is we are growing because our cause is just and honest. What we need is a game plan such as a petition drive like Dave Patch, where we display our total numbers. Letter drives, phone drives, demonstrations with sign carriers where the media has to report, and have a spokesperson to explain to the media the correct message, and as Mary pointed out so perfectfully, somewhere out there is a person seeking public office that needs a platform. Does anybody remember the wake up call Ross Perot gave back in the 90,s. Maybe a menu of items that one could choose to be a activist. United we stand and planned we move forward.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By dave on 1/18/2006 3:06 PM
The DTCC has two major subs.: NSCC and DTC which they partially own (the brokerage industry also takes a direct stake in these subs.). In addition, they have a mysterious nominee company called Cede & Co., which is, according to Hoovers the DTCC itself.

As a trust, the DTC is not allowed to hold trust assets in their own name, so they hold them in the name of their parent, which is a holding company shell.

If lawsuits against the DTCC are successful, are the street form shares segregated in some way if they are registered to the DTCC itself? Or can the DTCC or its creditors sell your shares to pay off their debts?

The system is beyond bizarre when you realize that there is no need for Cede & Co. or the DTC.

Company transfer agents are registering shares to Cede & Co. and the DTC keeps track of the names of the real brokerage that is the beneficiary. Why can't the transfer agent register directly to the beneficial owner? Why does Cede need to get involved?

The NSCC manages clearing and has a system for reconciling x-clearing and it sends a message each day to move the beneficial subaccounts at the DTC.

Why can't we save a step and just have those instructions go directly to the company transfer agent, who competes with other company transfer agents in a fully transparent manner.

If this is confusing, please ask me to clarify.

- some people have said that you can't trust the company transfer agent, but you are ALREADY trusting the company transfer agent. The transfer agent manages all share records including those registered to Cede & Co.

- the beneficial positions would now become actual registered positions

- this wouldn't require certs. - transfer agents can handle electronic record keeping

- I've heard the argument that there would be an infrastructure issue. Why couldn't we require the DTCC to rent access to their servers? Nothing would need to change technically, except the shares would be registered to the beneficial owner at the transfer agent rather than this mysterious third party.

What I am saying is confusing, but what I am trying to say is that the DTC is an unnecessary extra level of bureacracy that has no benefit to anyone but their owners and the crooks and which causes a number of problems.

When something is as screwed up as this is, you have to ask "who benefits?"
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By PhantomCertificates on 1/18/2006 8:27 PM
There may be another angle to approach this issue. Consider this, the state of Florida has something called an "intangable tax". This tax is essentially like a property tax based on a persons assets (includes stocks and bonds that don't have an exemption). Considering that we really don't know that we own anything with the FTD issue when we buy a stock, I'm not sure that an IOU exactly counts as an asset. If the state can't provide us with proof that we actually own anything, then don't we have a case against them for back taxes collected until they can allow us to get the proof that we actually own something? I would thing that the last thing a state would like is lost revenues (future and past). If there are other states with similar laws, we could very well start this fight from the state level to pressure the US Government, the SEC, DTCC, and other agencies. Anybody think this approach might have a chance?
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By rtway1 on 1/18/2006 9:02 PM
This scenario sounds great especially if you could take it a step further where the burden of proof would fall upon the state to do the leg work.Maybe even probate court.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By bobo on 1/18/2006 10:28 PM
A great new piece has been added to the Library, and will sound all too familiar to most who have been following the disinformation battles on the Yahoo message boards. It is in the second section of the Library, and is titled "Twenty-Five Ways to Supress The Truth: The Rules Of Disinformation."

A must read for the tactics employed by those who are arguing against there being a problem with naked short selling, and for secrecy in all matters relating to the participants' actions in the market.
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Eric on 1/19/2006 8:33 AM
http://www.answers.com/cede
Re: The Kindler, Gentler SEC At Work - A Slap In The Face With A Brick By Eric on 1/19/2006 8:36 AM
http://ming.tv/flemming2.php?did=10&vid=10&xmode=show_article&amode=standard&aoffset=0&artid=000010-000923&time=1071474122

Ming the Mechanic: The unknown 20 trillion dollar company

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