New Forbes On NASAA Letter; My Email To Global Links
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Bob O'Brien's Sanity Check Blog
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10/16/2006 5:06 AM |
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Forbes has another "must read" piece, this time covering the NASAA letter to the SEC, and the resulting controversy over the take from the experts in securities regulation at the state level, versus Wall Street's "for-profit" privately-owned clearing firm - the DTCC.
Read the article here.
It's basically pretty simple. The NASAA letter, among other things, correctly calls for transparency in the US markets, especially when it comes to illegal trading by larcenous participants. Wall Street, and the clearing and settling monopoly that is owned by the same brokers who are engaging in the illegal behavior, don't want to reveal anything.
Anyone confused? Regulators say stop breaking the law, and show us who is. Lawbreakers saying, "It's a privacy issue!"
Really very straightforward.
Want to talk balls? As in, unbelievable gall? Try this:
"In a letter fired off by the DTCC's outside counsel, Proskauer Rose, to Klein a few days after that comment letter appeared, the DTCC said the accusations that it hampered his investigation were "false" and demanded that Utah "correct the record" with the SEC on its dealings with the DTCC."
Yes. Who are you going to believe - the outside attorney who represents those repeatedly accused of obstructing investigations, and stonewalling any discovery by anyone, on federal pre-emption grounds, or virtually anything else....or the State Regulator who demanded the info in the first place? Who has more credibility - the guy chartered with protecting companies and investors from Wall Street, or the Wall Street mouthpiece? "We weren't hampering investigations. When we refuse to give you the info, it's more like, we are helping you see how unimportant that info is in the grand scheme of things...and what does hampering really mean, anyway? I mean, the word itself is so, ambiguous...like laundry hampers, were we merely assisting in the airing of laundry, or acting as a storage receptacle for that laundry - and if so, aren't we merely saying we are storing info, which is what we really are intended to do?"
My favorite line from the whole article is this one from the DTCC:
""A fundamental issue of concern within the industry has been that disclosing current fails data on a stock would reveal position information and could be used to manipulate the market," said Larry Thompson, DTCC's general counsel, in a Sept. 27 letter."
Yes. I'm sure the industry is very concerned about revealing information about who is illegally manipulating the market down. The very idea that the market might punish that behavior by righting it, and not allowing the manipulation to continue, has got to have the big brokerages who do it, and who assist their large hedge fund clients doing it, awake at night. The last thing that Wall Street wants is information about how large the illegal manipulative trading strategy is, and who is most engaging in the illegal manipulative strategy, available to anyone. Billionaires could lose a lot of their cash if that was known.
Does everyone get this? They are basically saying that revealing the information on who is illegally failing to deliver, which is against the law for anyone except for market makers in BONA FIDE market making instances (note that failing on an open ended basis is not bona fide market making), could cause those illegally generated positions/profits to go away, from a legal reaction by the market to having the info.
And the SEC goes along with this crap?
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Here's a copy of an email I sent to Global Links - they are suing the DTCC over a completely biased and IMO defamatory piece the DTCC issued as an apologist piece when it was revealed that GL had 27 million FTDs at a time the company only had 1.1 million shares issued. You can see that original release here. I don't know whether GL is the most honest company in the world, or a snake-pit of crookery - but what I do know is that what happened to them shouldn't happen in the US equities market, and that the DTCC's response to them was completely out of line. I encourage everyone to write GL if you feel the same way, and drop them a note of support.
Patrick Donahoo
Manager Marketing Services
Global Links Corp
3571 E Sunset Rd
Las Vegas, NV 89120
(702) 436-7007 Phone
(702) 436-7008 Fax
E-mail: pdonahoo@globallinkscorp.com
I read with a sense of incredulity the piece put out by the DTCC, dated August 31, 2006. As I read it, I was struck with a sense of awe at the misdirection and libelous statements. They mention your reverse stock splits in the same breath as stating that technique is a gimmick penny stocks use to artificially increase their market price - how cutting the number of shares, thereby increasing the price per share by the ration cut, results in "artificial" increase is beyond me, but the way it is stated, it sounds like you are running some sort of con or scam by doing so.
I also was stunned at the DTCC's statement that your 27 million share FTD position was due to some info not getting from your transfer agent - didn't you have a symbol change? How, precisely, could a new stock symbol be overlooked by the industry chartered with making a market in your stock? And why, precisely, was that "error" allowed to continue to this day, creating a windfall for anyone short your stock at the time of the "error" and effectively reducing your market cap by 99.7%, in perpetuity? Is this some bizarre case of, "accidents happen, my bad" where the industry gets to keep investors' money when THEY make an "error." Why is it that I never benefit from errors like that? When is my net worth going to increase by 99.7% because of a broker's "error?" It seems that these kinds of "errors", if that is what they are, directly benefit short sellers and market makers who are net short, to the perpetual detriment of the company, and shareholders.
That regulators haven't corrected this error, and have allowed investors to lose 99.7% of their worth, along with the company, is jaw-dropping.
The DTCC's false math on the value of the damage in dollars was also mind boggling. No sentient human with a working brain could make that sort of idiotic comparison by accident - it was clearly an attempt to say, "Hey, stop the whining, so we cut 99.7% of a company's market cap overnight, and investors lost basically everything by our doing so - if you take the new, completely bogus valuation our owners, the brokers, erroneously (per them, anyway) assigned, it really is nothing, so get over it." If it is such a small deal, then why hasn't the DTCC or the SEC stopped trading, and corrected the small deal? Again, the shorts and market makers get to keep their ill-gotten gains, while the company and the SEC loses.
I completely support your going after the DTCC for their disingenuous and damaging statements.
Good luck. What happened to your investors is supposed to be impossible. And yet almost two years later, they are still out the money, while Wall Street stonewalls and keeps their retirements.
That's not right.
Good luck on forcing the miscreants into the light.
Regards,
Bob O'Brien
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