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LETTERS TO THE UNITED STATES SECURITIES & EXCHANGE COMMISSION (SEC) about Wall Street Corruption / And related articles
By Reza Ganjavi 

SEC’s Roundtable on Regulating Short-Selling was a Replay of Waxman Hearings on Regulating Tobacco

DATE:            11 May 2009
TO:                 Honorable Madam Chairman Mary L. Schapiro
CC:                 SEC Commissioners, Selected Members of Congress
FROM:           Reza Ganjavi
SUBJECT:      Critique of SEC’s Roundtable on Short Selling Regulation

Dear Honorable Madam Chairman Mary L. Schapiro:

I am writing to humbly give you feedback on the 5 May 2009 “Roundtable to Examine Short Sale Price Test and Circuit Breaker Restrictions” which I watched with great interest.

First off, it was a pleasure to see both your interview with Bloomberg and you chairing the panel discussion on short selling on May 5. Your nomination has been one of President Obama's best moves so far. Congratulations to you and the country for having such a fine SEC Chairwoman. I hope your actions will speak louder than words and that my optimism is correct. So far, you seem to have shaken up the SEC in a good way.

I agree with those who believe the SEC has been asleep at the wheel or that it’s been a “joint venture between the Government and Wall Street.” Its awakening is long overdue. Good luck in your efforts in really protecting investors and not criminal manipulators which many hedge funds are, in one form or another, whether they’ve been convicted of it or not. I remind you that prior to your engagement, the SEC had not, and to my knowledge, and to date still has not, prosecuted a single case against illegal, criminal naked shorting. The SEC has a long long way to go to get out of its apparent siding with Wall Street and win the confidence of Main Street investors.

Here are some of my observations and opinions about the Roundtable:

In general I was surprised by the makeup of the first two panels which to a large majority represented the interest of Wall Street, not Main Street. Invesco and Fidelity, both as Wall Street as you can get, shamelessly said they are representing Main Street because of their individual investor accounts. Nobody asked them about how much fees they get from institutional investors and large hedge funds who spend billions of dollars in fees and have analysts, journalists, and brokers in their pockets. This is not a matter of fad, but a matter of fact.

The testimonies reminded me of the famous “Waxman Hearings” on the Regulation of Tobacco Products on April 14, 1994, by the House’s Subcommittee on Health and the Environment chaired by Representative Waxman in which the "7 Dwarves", the 7 CEOs of Big Tobacco shamelessly testified, under oath, that "nicotine is not addictive".

I could not believe that Fidelity, Invesco, Credit Suisse, Citadel, and other major Wall Street firms or those with an interest in protecting hedge funds testified that there is nothing wrong with the market, and denied manipulative practices that their clients are engaged in.

These large brokers and their large hedge fund customers that were represented on the panels, even by a couple of academics, such as Charles M. Jones of Columbia Business School, clearly do not wish for more regulation. They're used to going virtually unregulated for years during Bush Administration’s hands-off approach. More regulation will mean a cut in their profit, a cut in their taking away money which Main Street should have if it was not for manipulative practices which are done so politely that these folks are shamelessly denying it even happens.

Naked short selling happens every day.  Now the SEC, after ignoring the subject for a long time, finally said the 3-day hard-delivery rule should really be followed. However, is this rule enforced? Even if it is, it is an ineffective rule without a pre-borrow requirement since during those 3 days a hedge fund can naked short a stock, drag it down, paralyze it, and then buy at a lower level and the repeat it – without violating the hard-delivery rule. This happens every day to good hard working companies that are trying to make the world a better place. And these guys have the nerve to say there is nothing wrong.

Main Street is regularly abused and bullied by Wall Street and it all goes seemingly unnoticed while the SEC was asleep behind the wheel before your time. Will you have the courage to change that and stand up to the crooked elements who are not exceptions but run rampant up and down Wall Street? On that note, I have heard numerous times recently that the SEC's enforcement division problems are due to lack of enforcement resources. However, I watched an interview with Mr. Cox in which he said this was not the case – that there were enough resources. If he was right then the problem was something else. Today’s GAO’s report sheds new light on the workings of the SEC under Mr. Cox: “Cox’s SEC Hindered Probes, Slowed Cases, Shrank Fines, GAO Says”, reads one headline, and it point to Republican Commissioners as supporting less stringent enforcement.

Contrary to what some of the speakers at this roundtable stated, the concerns about short selling are not paranoia. My concerns are very real and legitimate. I have an MBA from a top-rated Business School and lots of professional experience in various fields such as management consulting, analysis, engineering, and managing large projects. I have had several Wall Street firms as clients and am as well educated an individual investor as most get, or at least not merely as naive as Republican Commissioners Troy A. Paredes and Kathleen L. Casey, and Fidelity and Invesco representatives like to believe – one who blindly believes shorts are to blame because s/he does not understand the subject, has paranoia, is following fashion, and needs to get educated.

The problems associated with short selling is NOT just a matter of perception as implied by these Republican Commissioners and stated by Wall Street representatives. Many individual investors are well educated. You have to be knowing you’re playing in a non-level playing field. It seems that the SEC is the one what needs better education. Listen to a self-admitted manipulator, Jim Cramer bragging about crooked techniques of hedge funds and how they get away with it because of SEC’s lack of competence:

"You can't foment [create the impression that a stock is down]. That's a violation... But you do it anyway because the SEC doesn't understand it…. What's important when you are in that hedge fund mode is to not be doing anything that is remotely truthful, because the truth is so against your view - it is important to create a new truth to develop a fiction".

I am very well educated on the subject and I am still very wary, very untrusting of the financial system and believe deep in my heart that it is crooked and criminal because criminal activity happens every day and it is not stopped, and not even investigated.  The very lack of SEC rules, such as NOT requiring pre-borrow for shorting, and NOT disclosing to the public who large naked short sellers are, help and protect Wall Street to the detriment of Main Street investors and companies.  Those few rules in palce are not enforced (as proof, please show us a single case of naked shorting that’s ever prosecuted in SEC’s entire history). I am therefore upset.  I like to invest the little money I have saved through hard work and painful investments, but it is not a level playing field. The hedge funds have the upper hand, and the cop, the SEC, seems to be on their side.

I could not believe that Charles M. Jones of Columbia Business School was trying to sell a false idea so cunningly. He said if shorting is stopped after circuit breakers goes off, it could hurt the stock more because it takes away the liquidity. How do you figure that? If shorting is not allowed any more it means no more shorting. Simple. Shorting makes the price drop. Naked shorting makes the price drop artificially.  How in the world would it help a stock not fall further if shorting is disallowed when shorting is an act which makes a stock drop (supply/demand). I don’t need to be a finance professor to see his logic is false and that his whole attitude is in bed with hedge funds.

It was refreshing to hear Dr. Robert Shapiro’s academic testimony supporting pre-borrow rules and other regulations to tie up hands of manipulative short sellers.

Testimony of Michael McAlevey of General Electric Corporation was sincere and honest and not rooted in some crooked inclination and affiliation unlike some of the other testimonies which were clearly aimed at protecting large hedge fund customers.

Brian Conroy of Fidelity stated there is no problem, that everything is just fine, no further regulation is necessary, and two times he shamelessly contended that the subject is one of fashion, a fad.

Larry Leibowitz, of The New York Stock Exchange clearly doesn’t like further regulation or tying hands of shorts. He likes his commissions and his hedge fund customers.

Dan Mathisson of Credit Suisse also dominated the presentation, again, to push his agenda of “let us go unpoliced.” I was shocked that right off the bat he threatened that a proposed change will take a year to implement. Please ask him to submit the details of how he derived this estimate. I have run a lot of software projects for over 20 years including ones for Wall Street firms. One year is a long time, and what you’re trying to do is not inherently complicated. He’s just trying to scare you.

Kevin Cronin of Invesco in his opening remarks emphasized a point which was not even part of the agenda: that SEC should not disclose short positions. I think the public has the right to know who large short sellers are, and without much of a delay – a delay long enough as dictated by technical reporting constraints and no longer.  But Mr. Cronin and others on Walls Street are nervous about this possibility because they will be very embarrassed for their clients to know how these good guys could be bad guys at the same time. Companies fall in the claws of vulture financiers every day because the large shorts and their affiliations are not known. Many Wall Street firms are nervous about this because it will trim their ability to manipulate. The “front running” concern is just an excuse. Why is not an issue for long positions. Why should short sales be treated differently?

Republican Commissioner Kathleen L. Casey dominated the questioning and I felt her questions were prompting answers which were pro-Wall Street. Democratic Commissioner Luis A. Aguilar’s silence was deafening.

Dendreon (DNDN) was mentioned a couple of times during the Roundtable. Dendreon’s problems with short sellers and naked shorts are not only from last month. They go way back and the SEC did nothing about manipulative hedge funds, analysts, and journalists who helped deny a life extending safe biologic from reaching dying patients. Such can be the consequence of the policeman being sleep at the wheel, and we tried to warn the SEC about this problem long ago.

The SEC needs to mandate that all publicly traded companies are subject to a pre-borrow requirement. This will fix a major corruption hole that's bogging the financial system. I am sure the "Seven Dwarves" will disagree and tell you that we have no problems with short selling. But we indeed do.

I am as Main Street as you can get, and I know lots of other small investors who are highly educated, and we all neither trust the financial system nor the SEC. When we hear SEC speak about protecting investors, it sounds like a joke, because as soon as a small investor buys a small company stock which has a large short interest, they're entering an unfair game against a criminal group who manipulate, lie, cheat, distort, abuse the system, sell what is not theirs, and sell what they have not even borrowed (that is a crime under every judicial system in the world but the SEC tolerates it as long as you sell what is not yours and what you have not even borrowed for three days and buy it back once you've pressured the price down).

Madame commissioner, please do not let us down. Please do not let these rituals and rhetoric slow you or distract you. Fidelity is wrong. There is very much a problem. There is chaos in confidence. Small investors do not trust Wall Street, and do not trust the SEC because Mr. Cox gave us nothing more than a lot of lip service. Please help restore our confidence by going head on against manipulative shorting practices which have only one solution and that is a pre-borrow rule.  And reveal to us who our companies’ large short sellers are. Short-and-distort is not a joke. It happens every day. We feel it with our sweat and blood. Investors need protection against these rampant predators. Please help us.

In summary, it is absolutely critical that:

a)    The SEC should impose a mandatory "pre-borrow" requirement for shorting all stocks.
b)    The SEC should reveals to public, without much delay, who large short sellers are, just like it reveals who large shareholders are. Every public company deserves to know who is betting in a big way against it so that it can prevent being a victim of toxic financing.
c)    The SEC should establish a circuit breaker rule, and an uptick rule.

Kind Regards
Reza Ganjavi
<personal details snipped for web posting>

Email To SEC On Abusive Short Selling

By Reza Ganjavi

18 Nov 2015

Dear Madam Chairman White:

It was a pleasure seeing you on CSPAN. Thanks for your good work and service to our country.

I still think you should make public identities of large short positions just as long positions are public. There is no excuse for not doing so including front-running that can also happen in the long position. Hedge fund lobby with help from Republican commissioners manipulated the SEC into keeping the screws loose on shorts. Please help us Main Street and companies to know who is betting against them. And they usually engage in short & distort and the most immoral behavior to rip Main Street off its hard earned money.

Thanks & Kind Regards
Reza Ganjavi


Subject: File No. 4-590

9 October 2009

Dear Madam Chairman Schapiro:

While I enormously admire your spirit of change, enjoy your remarks and speeches, and support your initiatives to rein in on the abusers of the financial systems, I am disappointed at the composition of the recent panel on short selling and pre-borrow. The panels that discussed these topics were comprised largely of supporters of short selling, short sellers themselves, and academics who are obviously using their lop-sided research which ignore the realities of short selling that Main Street faces every day (e.g. Short & Distort) in favor of large hedge funds who are ruining the economy, specially small innovative companies, and Main Street investors.

I found it insulting to the honor of the SEC for these guys to sit there and lecture the SEC about short selling being "a force of good" while completely ignoring the very practices that many short sellers are involved in which are highly immoral, unethical, disruptive to the economy, extremely harmful to small innovative companies that are the future of the world economy -- actions which are in my opinion and legal philosophy, criminal.

Nobody spoke about a well known and widely utilized practice of short-and-distort which small companies and Main Street investors have to face every single day. I will elaborate on this theme and give you more detailed feedback at a later date but since I feel this issue is urgent, I had to write to you before finding the time to review and research all the submitted material. As I said in previous letters, the house is on fire -- Main Street needs protection now. Many small innovative companies are abused by short sellers every day and we need your protection against these abuses.

The problem is not only with naked shorting. Reduction in number of fails-to-deliver does not mean the problem of abusive short selling is solved.

Secondly, I found the discussion on whether pre-borrow and hard-locate should be mandated or not a philosophically false question. According to every legal philosophy it is a crime to sell something that is not yours and you have not borrowed. Except of course in this case where we discuss at length whether people should be allowed to sell something that is not theirs and have not concretely borrowed. What an unintelligent and pitiful discussion. This is a core aspect of the corrupted financial markets which the SEC needs to take control of and resolve by mandating immediately -- not after years of discussion and getting lectures from the short sellers themselves how they should be left alone.

Thirdly, regarding disclosure, again, a facet of our corrupted financial system is that short sellers get preferential treatment -- the people who are inherently interested in destruction of hard-working innovative companies are getting preferential treatment to those who invest in those companies and help the economy by doing so.  Another very crooked feature of our markets that the small companies that have to rely on equity markets to raise needed capital have to live with every day is that the SEC is protecting the names of large short sellers who are mostly there, and many are lobbying every day, to have those companies destroyed. This is a fact Madam Chairman. The SEC should disclose large short sellers just as it does large shareholders without any more delay than required for long positions. The current protection is very much against the Main Street which you have said you like to protect. Let's see those words turn into action.

Fourthly, what happened to the uptick rule? Lots of talk but no action.

Lastly, exempting market makers from further regulation is a very bad idea because we have concrete proof that market makers are sometimes in bed with short sellers and large hedgefunds and themselves are engaged in "short and distort". Do not every think that market makers are good boys. There are many instances of their highly immoral and unethical and criminal behavior in the practice of short-and-distort. I can think of one instance of a market maker, whose analyst was publishing faulty research reports to support their large hedgefund short clients. The corruption runs deep. Allowing market makers off the hook will not help the cleanup which is urgently needed.

I will send in a more detailed feedback in writing or video at a later date.

Many thanks for your kind consideration. We need help Madam Chairman. Small companies need help. Small company investors need help against abusive short sellers -- not just naked short sellers but all short sellers. They can still play their supposed "force of good" in the market within much more stringent regulation and not just direction by the SEC. For too long they've gotten used to raping, raiding and abusing Main Street and now they're heavily opposed to any regulation. Using a lot of arguments and their academics, they're simply trying to distract the SEC from the job that you must do: to clean this mess up, now, and not later. We need urgent immediate action. Please help protect Main Street from short sellers -- not just naked short sellers.

Best Regards
Reza Ganjavi
<phone snipped for web posting>

Your comments for file number S7-08-09 were received on September 13, 2009.

For God's sake SEC, it's time to do something now, after years of being a completely useless organization in not just not catching Madoff but many many criminals who naked short stocks, run great companies to the ground, sell what is not theirs, sell what they have not even borrowed, etc..

I reiterate my call that "the house is on fire" and instead of your bureaucracy and delay after delay, for God's sake SEC, do something for a change.

What is it going to take for you to enforce illegal naked shorting? You don't need to invent a rocket science to reinstate the uptick rule and you don't need the comments of the hedge fund industry and naked shorts to tell you what you shouldn't be doing. You need to instate and reinstate every tool, rule, and regulation that you can think of to tie up the hands of criminals who steal the money of honest hard working companies and investors by manipulative methods.

The SEC has protected Wall Street for way too long and it is now time to get off its seat and do something for Main Street. Hello, anybody listening or is the cop still asleep at the wheel like it has been for way too long.



Letter to Mr. Robert Khuzami, Director of Enforcement

10 June 2010

Dear SEC

As an individual investor I still feel very much out in the cold vs. the powers of Wall Street and the sympathy they have historically received from the SEC and specially the Republican commissioners. So the result of Main Street vs. Wall Street is clear: Main Street loses, not only because Wall Street has more resources but because the SEC seems to be on its side. When it comes to curbing manipulative practices SEC takes too long and at the end its action is marginal. For the longest time the cop was asleep at the wheel, now we see a few movements, far too little, but better than none.

And it is not just Main Street that loses, but small companies that are victims of toxic financiers, and there are concrete things SEC can do to make this better but SEC has repeatedly failed to do anything in this regard and instead gets caught in months and years of rhetoric and useless beating around the bush. Something as simple as mandating a large short seller's identity to be available to a company would help companies tremendously in knowing their friends and enemies and who they do business with and not, but SEC has denied this right to small companies and equally Main Street because of nonsense, utterly incoherent argument posed by the hedge fund industry and supported by Republican commissioners that somehow large short sellers' identity should be protected for competitive reasons while large shareholders' identities should not (please see my last emails on the subject archives of which are available on under the "Ethics & Financial Markets" section).

I like to bring your attention to trading in Beacon Power, one of these rape victims of Wall Street toxic financiers with zero protection by SEC. Beacon has spent over 10 years and millions of dollars developing the best energy storage technology around. When you think of energy storage you think of batteries, but Beacon's flywheels beat batteries hands down for applications such as grid frequency regulation which effects every citizen every day of the year, and the security and stability of the national grid. The US government has fully backed Beacon Power by loan guarantee, grant, contracts, and various endorsements. SEC, as the financial markets cop has not provided any protection to Beacon or companies like Beacon, which has resulted in the company to fall in toxic traps and its stock being manipulated time and again.

Further to that long introduction, please investigate the latest trading of Beacon Power (Nasdaq: BCON). The company has issued a number of warrants outstanding ( ) and the stock might be manipulated to bring the price close to the exercise price of $0.272. And/or please investigate the great deal of "short & distort" that goes on with Beacon. You may start with the large short sellers -- you may know who they are but you are protecting their identity from us and from Beacon to protect the short sellers (thanks SEC, you're siding with Wall Street again).

It's nice to read Honorable Ms. Schapiro speak about building investor confidence, but I can assure you, the Main Streets many individual investors know have zero confidence in the SEC presently. I hope this will change. I think you've prosecuted one naked short case in your entire history? That's better than none!!

Why can companies not know the names and positions of large entities who are betting against them just as they can regarding entities who are investing in them? Why? The reasonings I've heard so far have been completely illogical and rhetorical and shout only one thing: Because SEC wants to protect Wall Street against Main Street. Sorry, but that seems to be the fact, in my opinion.

Thanks & Best Regards
Reza Ganjavi
<contact info>

PART II -- Letter to Mr. Robert Khuzami, Director of Enforcement

Dear Mr. Khuzami:

I hope you saw my letter of 10 June 2010 (reprinted below).
May I add a couple of notes:

1) I am not accusing the warrant holders of manipulating the stock but it appears to me that this might be the case. Neither I, nor the company itself has the means of investigating whether this is true or not, but SEC does. All I can say is that Beacon has been a victim of manipulative practices which were immoral and illegal, but under the current rules, the company receives no protection from the SEC, such as the mandate that people who sell its shares would have to borrow it first, or the identity of people who have bet heavily against the company by shorting over 4 Million shares are revealed to the company. But I do seriously suspect, that illegal manipulation of Beacon's shares have occurred and I hope you will order your department to investigate this matter. Who has done it? I do not know. Could be a one or more of warrant holders, short sellers, or people who have other malicious intentions towards the company and its rule-changing technology.

2) I am not an enforcement professional, but from a layman's view, I would perhaps suggest the following:

a) Get a list of large short sellers (which SEC has but is keeping private to protect the shorts)
b) Get a list of the warrant holders from the last offering (December 9, 2009)
c) Demand list of all traders of the warrant holders and their affiliates.
d) Demand list of all traders of the large short sellers and their affiliates.
e) Investigate their other activities -- somebody must be behind this "short and distort" and all the false publicity and misrepresentation that is going on to help push Beacon's shares down.
f) Do a detailed investigation of the short term recursive naked shorting of Beacon's shares (sell without hard locating the shares, cover within 3 days at lower price, repeat -- which is a convenient way to naked short but as far as the SEC is concerned get away with murder. It's unbelievable that the SEC is not mandating a hard-locate rule. This is against every criminal justice system that I know of: it is a crime to sell what you do not have and not have borrowed, but for some reason, for the SEC, this is normal, because this is the way Wall Street wants it and this is the way they get it.
You might be surprised at what you find. Doing this kind of investigation for Main Street and standing up for Main Street will highly elevate SEC's credibility both with Main Street and the Congress.
Thanks & Best Regards
Reza Ganjavi
<contact info>

Letter to Mr. Robert Khuzami, Director of Enforcement

18 Aug 2010

Dear Mr. Khuzami and Madam Chairman Schapiro:

Beacon Power (Nasdaq: BCON) just received a $43M loan guarantee from the US Department of Energy, under Section 1705 of the American Recovery and Reinvestment Act. The government recognizes the importance of leading edge clean technologies for the future of the economy, environment, and global competitiveness. Beacon is building the world’s first Grid Frequency Regulation Flywheel Plant which is critical to the stability of the backbone of any nation, the electric grid. This plant is scheduled to be fully operational by the end of March 2011. The target market in the US is estimated as several billion dollars, and there is growing international demand for a clean effective way of doing frequency regulation.

While the government is trying to support and foster Beacon, Wall Street is trying to kill them by shorting, naked-shorting, and manipulating its stock. Like many other small innovative companies, Beacon relies on capital markets for funding and has gone through several rounds of toxic financing already. The SEC has not been helpful a bit. You know who the large short sellers are but you are protecting their identities for reasons which only make sense to short sellers and their supporters (including your own Republican Commissioners).

There are warrants that are expiring at the end of this month and the stock seems manipulated in relation to these warrants.

I brought this to your attention in my letter of 10 June 2010. By the end of June a lot of warrants got exercised. The trading of the stock now is even more suspicious than in June. There seems to be a determined effort to keep the price capped. The least you could do is to investigate if the people who are shorting the stock are not violating any rules. You could request trade logs from the large short sellers of BCON (you have their list, we don’t). You could also look at the trading of the warrant holders and their affiliated market makers.

According to one report, since last August, 94.56 million shares have been shorted. 26.02% of all daily volume is short selling.
Many thanks for your kind consideration
Best Regards
Reza Ganjavi


27 Oct 2013

To: Chairlady Mary Jo White, Securities and Exchange Commission, Washington, D.C., USA

Dear Madam: 

It was music to my ears to read the news: “U.S. SEC on the prowl for rule breakers big and small”

Masses of individual investors in US securities have lost faith in the market because of the rampant manipulation by the big and powerful banks, brokers, hedge funds, etc., a.k.a. the “big boys” on Wall Street. 

The SEC over the years has developed a reputation of having no teeth. Until Chairlady Shapiro’s time the SEC had never prosecuted an illegal naked shorting case. SEC’s announcements and warnings to the financial criminals always comes across as soft and tolerant. I admire you for the strong message in this news release and hope that you turn it into some real action to clean up this utter mess and bring back confidence to the markets and Main Street investors.

Wall Street has turned into a Casino more glamorous than all casinos combined in which the owners -- the winners -- are the big boys and the losers have consistently been Main Street who get the short end of the stick from all angles including corporations which tend to favor institutional investors to retails and at times divulge info to larger investors which smaller investors do not have access to. 

It was disheartening to see the Republican commissioners’ sympathy for short sellers at the last SEC short selling roundtable I saw. The SEC bought the frivolous arguments of the hedge fund industry, short sellers, and lobbyists of the big boys, that somehow hiding the identity of large short sellers in a company is necessary (while large shareholders’ identities are publicly available). This does not thing but to give the power of anonymity to enable further manipulation, which a Commissioner referred to as “short and distort”. We’ve seen plenty of examples of that and that is a major reason for lack of confidence in the markets by Main Street.

Martin Shkreli

One example of this short and distort scheme was when hedge fund manager Martin Shkreli shorted Avanir (AVNR), and in a Seeking Alpha article ( he posted frivolous arguments against Arena’s patents.

He later made a substantial profit in AVNR. In the article above written on May 31, 2011, he wrote: "I promise to donate 50% of my personal AVNR-related profits to charity. I agree to be held accountable to this.” 

On February 21, 2012 his assistant wrote to me that he has "committed to donating a large sum to an organization" and that he was planning a joint announcement in the near future. To date, a year and a half later, nothing has been announced that I know of.

The company he owned at the time (MSMB CAPITAL: doesn’t seem to exist any more. His new company / address seems to be:

Martin Shkreli, Retrophin, Inc. 777 Third Avenue, 22nd Floor, New York, NY 10017, (646) 837-5863,,,,

[2020 update: Martin Shkreli is currently in Federal prison! Yes!]

Credit Suisse

Lee Kalowski & Co. of Credit Suisse initiated their coverage on Arena with a report which was full of inaccuracies and shortcomings. Main Street rolled up its sleeve and published a correction:

But Main Street can’t possibly withstand a gorilla like Credit Suisse, and often small companies don’t have the vision, experience, determination, talent, courage, to counter the disparagement that is published against them.

Jim Cramer

Jim Cramer is on record for admitting to manipulation but he walked free without ever getting charged. See this video:

The arrogance of Jim Cramer goes as far as saying being in a hedge fund mode you don’t do anything remotely truthful – that truth is your enemy.

This has to be more of an issue than moral decadence.

Adam Feuerstein

Adam Feuerstein works for Jim Cramer’s company, and is on record for numerous publication of distortions, misinformation, and outright lies. His communications and affiliations should be investigated.

SAC Capital

SAC seems to run a shop which thrives on insider information. I have reasons to believe SAC was short DNDN before the 2007 Advisory Committee meeting.

Dr. Howard Scher, Dr. Maha Hussain

Howard Scher and Maha Hussain were involved in the conspiracy to derail the approval of Dendreon’s drug in 2007. Thorough information is available on:


UBS analyst Maged Shenouda published false information about Dendreon in his research report and repeated it even after he was told it is false (that’s a classic definition of lying). This was before the 2007 AdComm when DNDN had a huge short interest.

Jonathan Aschoff

Aschoff was fined by NASD for pretending to be a doctor. In 2007 he was disparaging DNDN when the short interest was very high. He admitted to me in a phone conversation of having clients who are short DNDN.

Please investigate the above entities.

Daniel Drew said: "Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight.”. I am sure that’s not what the SEC wants.

I encourage you to invite members of Main Street to your next roundtables – and folks like Patrick Byrne and Jonathan Johnson who have dedicated lots of time and resources in fighting the crooks.

Very Best Wishes

Reza Ganjavi


Welcome Message to SEC Chair & Report of abusive naked shorting, reverse conversion, and a six point investigation suggestion.


Welcome Message to the new SEC Chief

Dear Honorable Mary Jo White:

Congratulations on your confirmation as the new head of the SEC. I wish you luck and all the powers of goodness in your new position. You have a critical role as the key sheriff in a crime-ridden town. Morals have gone out the window as people worshiping dollars are willing to do anything to get it including stepping on the truth and breaking the law as long as they can get away with it.

My main requests to you as a Main Street investor are :

1)  To prosecute market makers for abusing their ability to naked short stocks. They can legally naked short stocks but they abuse this ability to help their large hedge fund clients through use of reverse conversions and other means.

2)  Abolish rules which allow large short sellers to remain anonymous. The SEC was persuaded by the hedge fund industry to hide their identity and position using the frivolous argument of avoiding "front running". Large shareholders in a company must make public filings. Large short sellers must also be mandated to do that otherwise the SEC is helping the short sellers get an upper hand.

3)  Keep in mind, as much as hedge fund industry wants to sugar coat it,  most short selling is combined with lies, deceit, "short and distort" and other immoral and illegal activities explained above. So the SEC should have the least level of sympathy.

4)  Being a prosecutor you fully understand that it is criminal to sell what you do not have before you even borrow it. Worse, is to sell something you neither have nor borrowed. But the current rules allow short sellers to sell phantom shares and completely get away with it. That's like selling a house that doesn't even exist !!  My father had a stellar career in law and I heard about such crimes since I was a child.  Now I'm witnessing it every day happening on Wall Street legally. So short selling without pre-borrow should be criminal. And naked shorting under any circumstances should be criminal. Market makers are abusing it all the time.

Once again, welcome to the SEC; you're greeted by a beaten up, tired, abused and weary Main Street with a warm embrace and much hope.

All good wishes
Reza Ganjavi

Letter to the SEC about Reverse Conversions & Naked Shorting Abuses

Dear Messrs. Calamari, Rawlings, Sanchez:

I have great faith in you since you've already prosecuted a reverse conversion case. Another large reverse conversion on ARNA was done today and there's sufficient grounds to allege abuse. Please see the list of recent reverse conversions below and also please see a six (6) point suggestion for an investigation.

Even if a legitimate market maker is involved in this it is being done for one reason alone, and that is to cap the stock by phantom shares which a hedge fund obtains from the market maker through a Reverse Conversion -- shares that the market maker doesn't have but has manufactured (phantom shares) through naked shorting. This is an abuse of law which is meant to give market maker the ability to naked short to facilitate its role in providing liquidity. Market makers were not given the power to naked short in order to help some hedge fund -- which is trying to avoid huge losses due to having made a bad bet -- to have access to non existent shares which it uses to manipulate the stock by capping it.

Main Street is getting cheated here. I know the lobbyists of short sellers and hedge funds have helped convince the SEC that the identity and position of large shorts should not become public (like long positions are) and that market makers should be able to naked short freely, but market makers abuse these rules -- they're making shares out of thin air every day. By doing so they're helping hedge funds destroy companies which are the engines behind the future of American economy. Here, you have a very concrete case to go for. It's easy:

1) Find out if a legitimate market maker was behind these reverse conversions. If not, bingo.
2) If yes, are they using their exemption to naked short for the reason it was intended?
3) Are the clients of the market makers executing the reverse conversions already among the 64,168,688 shorts reported by NASDAQ on 3/28/13 and how did they use the shares created by the reverse conversions? Did they sell those shares quickly into the market or use them for some other purpose?
4) Are those 64 Million shorted shares located? How many of them are circulating as phantom shares through one after another cycles to prevent them from going on RegSHO?
5) If the large shorts are performing these reverse conversions, is the market maker aware of it? My hunch is the market maker is playing right along knowing exactly how he's abusing his exemption to naked short.
6) Is the SEC actively monitoring the reverse conversion positions of the market makers for ARNA to see if they are exchanging/trading them between each other to circumvent the intent of the laws allowing their exemption from locate and borrow in the first place?

Recent reverse  conversions in ARNA:

3/20/13  400,000 shares at $7.90 vs 4000 April 13 puts and calls.

3/25/13 720,000 shares around $8.53 vs 7200 April 12 puts and calls.

3/27/13  700,000 shares around $8.30 vs 7000 April 11 puts and calls.

3/27/13     75,000 shares around $8.30 vs 750  May 11 puts and calls.

4/10/13   500,000 shares at $8.10 vs 5000 May 13 puts and calls.

4/11/13 929,000 shares at 8.245 vs 9,290 May 13 puts and calls.

Kind Regards
Reza Ganjavi
Retail investor

(SINCE THE ABOVE I SENT NUMEROUS OTHER REPORTS OF REVERSE CONVERSIONS TO THE SEC -- and finally the big report got FINRA to act and stop the abuse!)


Dear SEC

I have sent several reports of reverse conversions using options of ARNA by hedge funds who are shorts and to delay their own death they are killing MAIN STREET. They're wounded dog who are not only involved in SHORT-AND-DISTORT through bankers, analysts, and journalists, they are ABUSING the market maker exemption to naked short. This is not some retail holder's delusion - it's a FACT.

By the way :

1. you can not rely on entities like Credit Suisse who run dark pools to police themselves.
2. did you ever investigate why Credit Suisse's equity research reports into Investment Banking? Or am I misunderstanding the Chinese Wall rule?
3. This might even be a hint: Credit Suisse has been involved in trashing ARNA -- their coverage started with ignoring key information which Main Street had to shout back and correct the misrepresentation:
4. But it's your job to look into the options trading and investigate it. The use of this exemption was not discussed in the short selling round table. Those innocent sounding hedge fund lobby guys and their Republican SEC sympathizers were talking about other excuses to justify short selling. None said market makers can bend the rules to give their large hedge fund clients (or themselves) access to PHANTOM SHARES which are in turn used to KILL good hardworking honest diligent companies and retail investors who don't have the same privilege and don't even know who is flooding their market with FAKE shares.

This should be CRIMINAL under any criminal justice system except by the SEC's' rule? You try to sell a car that is not yours and you go to jail. Today, they are trying to sell a car that doesn't even exist -- which is fabricated out of thin air using options which in turn forces naked shorting he stock WITHOUT IT EVER SHOWING UP ON REG-SHO. So the criminals are getting away with it and circumventing the rules intentionally ONLY BECAUSE THEY CAN NOT LOCATE ENOUGH SHARES TO LEGITIMATELY SHORT.

Perhaps in 50 years time people will look back just as we looked back at the Madoff case when it was too late.

Dear SEC, you need to give this matter priority and INVESTIGATE IT NOW -- not in 10 years when more and more companies and individuals are raided and raped by collusion of non-regulated dark pools, hedge funds, and market makers.  THE TIME TO ACT NOW. THIS IS EMERGENCY and you have a LIVE case RIGHT NOW. The CRIME IS IN PROGRESS. Please send a cop.

Are the criminal(s) too big to catch? Too connected? Too concealed? This is no small fish here -- 60 Million shares are shorted with a potential billion dollar loss so these wounded dogs (shorts) are violating rules to delay their loss and force retail to sell - trigger margin calls - erode confidence and psychology - technically break the company's equity - and prevent access to equitable levels of financing, coupled with their short-and-distort strategy.

This will be the bust of the decade. PLEASE INVESTIGATE it.

Thanks & Regard


27 Jul 2013

Response to SEC Survey

Main Street needs SEC's help. SEC needs to stop being sympathetic with

a) market makers who abuse their naked shorting exemption in allowing hedge funds to get their hands on non existent shares without them ever showing up on RegSHO by doing reverse conversions. How many of the reverse conversions we've reported have been investigated? In how many did the market maker comply with rules and in how many as they often say, they whispered to each other, who cares about the SEC / the SEC has no teeth. As long as the crooks think SEC won't investigate them they'll continue raiding and raping hard working Americans off their hard earned money.

b) short sellers who cripple hard working public companies and their retail investors and do so while they remain anonymous. The SEC, especially the Republican commissioners who've exhibited peculiar sympathy with short sellers, needs to stop being swayed by the Hedge Fund lobby with their frivolous arguments that hiding large short sellers' identities prevents front running. Let the crooks run against each other, create a stampede, and destroy each other. If front running by large shareholders is not an issue why is it an issue with large short sellers? A very simple question the hedge fund lobby pretends is clear and should never be asked -- but you need to ask that question of yourselves and LET THE AMERICAN PUBLIC KNOW EACH QUARTER WHO THE LARGE SHORT SELLERS IN EACH PUBLIC COMPANY ARE. WE THE PEOPLE DESERVE TO KNOW.



10 Aug 2013

Dear SEC:

I was happy to read your:

"SEC Issues Risk Alert On Options Trading Used To Evade Short-Sale Requirements"

While it's a tiny step in the right direction, as usual it is too soft, too polite, and won't do a thing to stop the abuses.

I have pointed out instances of potential abuse on numerous instances -- if your response to it is this memo, the abusers will laugh it off.

Your "Risk Alert" is basically telling thieves to be aware of thieves. It's just as ineffective as you telling dark pool operators like Credit Suisse that they should behave and police themselves.

It won't work.

There's plenty of evidence already in your hands that abuses include market makers and they laugh at SEC, Main Street, the country, the government, regulations, and everything that is good and right, as they break the rules.

I have given up all hope that this mess can be cleaned up. SEC simply has no teeth when it comes to taming the crooks and Main Street will continue to get raided and raped off its hard working money day in and out.

It's time to get serious and investigate the very people you expect to behave and be good boys. They laugh at these "Risk Alerts" and will continue their abuses until SEC puts some of them in prison.

Unfortunately watching a short-selling roundtable it seems the Republican Commissioners are sympathetic to short sellers and hedge fund lobby and as long as that's the case the SEC will remain a mediocre policeman which once in a while manages to put somebody in jail while most criminals get away with murder.

You can't expect the very market makers and brokers and dark pool operators who are involved in the abuses of their naked short selling exemption by their large hedge fund customers who pay them millions in commissions, to police those very customers and abuses. They ARE the abusers themselves. Why is this so hard to see. And if you see it, your memo should be a legal warning that we're going to knock your doors down when you least expect it and put you in prison if you engage in this practice - we're watching you closely.

Instead, what they got is effectively: "dear lovely abusers, we're going to turn a blind eye to the abuses and pretend you know nothing about your hedge fund clients abusing YOUR naked shorting exemption. They're the bad boys, you're good boys, you need to police them." It is far more likely the "good boys" in this scenario are in the same gang as the bad boys and are helping them. Don't you think if they weren't they would not have allowed it? They love the commissions fees bribes kickbacks insider information and everything else that goes on among the crooks.  So your telling them to stop it has no value at all except to say, oh SEC sees this thing is going on and it's not going to do anything to stop it.

All the above are in my humble opinion based on my non-professional observation.

Kind Regards
Reza Ganjavi

7 Sep 2013


This was published by someone about MANNKIND: on a day when BOA downgraded MNKD from 8 to 5 and the stock tanked. It's about suspicious activity on the days leading to the downgrade. Very well worth investigating. I am reporting this to the SEC because I believe market makers abuse their naked short selling exemptions with regards to reverse conversions with for example MNKD and ARNA. Best SEC has done so far is to issue a polite letter which has no teeth -- it's not even a warning. Now SEC needs to take one of these many cases - dig into the options and stock action and reverse conversions, prosecute a crook -- that's the way you clean up this mess and not by sending polite teeth-less letters.

Here's a clue:

Bank of America

There is no one on this board who thinks BOA had anything to do with the 300,000 share RC earlier in the week is there? And certainly no on on this board thinks BOA might have timed the analyst report for a couple days after the RC? Well, at least no one thinks the 300,000 shares were sold into the market earlier today. Of course not. Who would even raise such questions.


Response to a hedge fund manager

By Reza Ganjavi

Posted on SEC's site:

Why Hedge Fund Manager (TFS Capital), Larry S. Eiben's rationale does not hold water and why the SEC should allow investors to know the identity of large short sellers.

The hedge fund manager objects to the rule on two fronts but his reasoning is faulty at best. First, he thinks the rule is unlikely to be cost beneficial to investors. This depends on who he calls investors. I can assure you if investors know who the large short sellers are just like they know who the large longs are, they could make much better decision and save a lot of costs involved in investing in a manipulated, rigged market while the manipulators have the protection of SEC that their identity will not be revealed. Yes, I do call short sellers who gang up on a company, spread wrong rumors, commission faulty research reports, pay journalists and others to bash the company, manipulators.

Eiben's second objection which he calls philosophical is completely without merit. The double standard is the way it is now, where large longs are identified but large shorts are unidentified to the public. That is a double-standard that benefits the shorts hugely.

'In other words, this rule creates the impression that there are more bad apples in the short selling population than in general', the hedge fund manager writes.

That is simply a fact. It is a hard fact to face for the manipulators but it is so. How many long managers pay journalists and analysts and message board agents to spread false rumors about the company? Short sellers have been known to do this far more frequently. Yes, indeed, there are more bad apples in the short selling population than in general.

Do we need to remind this hedge fund manager who is trying to lobby the SEC to continue help keep large short sellers' identities quiet that it is shorts not longs who engage in naked short selling.

Is it not time for the SEC to stop protecting the identity of large short sellers and help investors know who are the entities who are ganging up on them? At the very least it helps the companies who are victims of such manipulative behaviors, to know who to go to for financing and be better protected against predatory practices of toxic pipes. That is the least the SEC could do.

Instead of acting though, the SEC is giving more and more time for large short sellers to remain hidden and continue to wreck havoc in the financial markets and ruin good companies, and thereby further ruin the economy. Wake up SEC. It is time to fight for Main Street not for Wall Street. Let us know who are the large short sellers.


Dr. Patrick Byrne vs. Wall Street Crooks

presented by

Dr. Patrick Byrne's Fight With Wall Street

Marked as "the most hated man" on Wall Street, Dr. Byrne, a Stanford Doctor of Philosophy in Philosophy, and CEO of has gone heads on with Wall Street crooks. More power to him and his cause.
Dr. Patrick M. Byrne is the Chairman of the Board & CEO of®.
Previously, Byrne was chairman, president and CEO of Centricut, LLC and held the same three positions at Fechheimer Brothers, Inc., a Berkshire Hathaway operating company. He is also the general partner of High Plains Investments LLC, an investment company located in Park City, Utah, and considers himself an investor by trade.
Byrne received his bachelor's degree from Dartmouth College, a master's degree from Cambridge University as a Marshall Scholar, and a doctorate in philosophy from Stanford University.
Here's a great talk by Dr. Byrne:

Here are a few other good articles and links to litigations / filings:


Dr. Patrick Byrne is one of my heros who's gone heads on with a large group of Wall Street crooks.

Watch this great presentation:


Problem of Naked Shorting; Corruption in US Financial System (as of Oct 2008); and what Dr. Patrick Byrne / DeepCapture is doing to fight it. [and related sites]

October 2008
by Reza Ganjavi

Dr. Patrick Byrne: “It’s not a little corruption at the edge of the system, it’s the system!”

Related sites :

If you don't know what shorting and naked shorting in the context of the stock market is, please Google the subjects.

The SEC’s charter is to protect the investors against abusive behavior but it has done very little so far. It has not brought a single case against illegal naked shorting.

Chairman Cox has said: “Illegal naked short selling is specially a threat to smaller public companies whose relatively thin market capitalization can be more easily manipulated.”

Chairman Cox: “The extreme abuses that are reflected in securities being chronically listed on Reg Sho’s threshold security list for months and years at a time is ample evidence that there is also fraud in the market that needs to be arrested.”

A couple of months ago when the financial turmoil heated up, the SEC temporarily banned naked short selling for 19 financial companies. Not all companies but just 19.

Richard Baker, a former representative and member of House Financial Services Committee who is now the CEO of “Managed Funds Association” which is the main US trade association for the hedge fund industry complained about this ban in an interview with Bloomberg with some arguments such as: “we don’t know what the SEC is trying to fix”. Really? Nothing is broken right?

And Mr. Bush’s SEC, as it stands today, has failed to properly police Wall Street. Want a good examople? Take a look at the naked short list. does a great job of exposing naked shorts. Take a look at: “Deutsche Bank Sold Massive Amounts of Phantom Stock” story on that website.
There are so many examples. There is so much corruption on Wall Street and such a cleanup job to do. Hopefully in the administration will clean up this mess.
When a hedge fund pays over $100M per year in commissions it has clout. When SEC doesn't act, things get worse. SEC is supposed to be policing Wall Street. Wall Street has not and will not police itself.  

Secretary Hank Paulson: “Naked short selling is wrong anywhere. Any investor, before they sell short, should line up the stock, and that goes without saying.”


Allegation: SEC officials provided confidential information to former colleagues working on Wall Street.

Interestingly enough the Washington Post reported today that :

"Senate investigators are looking into allegations that the head of SEC’s enforcement division, Linda Thomsen, gave information about investigations into Bear Stearns to the general counsel of J.P. Morgan Chase."

Senator Charles Grassly wrote a letter to the SEC requesting feedback on this allegation and wrote:

"Such conduct would reinforce the appearance that Enforcement decisions, and disclosures of information about them, are sometimes based not on the merits, but rather on access to senior officials by influential representatives of power brokers on Wall Street."

There we go.

Speaking of Linda Thomsen, I wrote a hot letter to her last night and copied the SEC commissioners and some members of the congress. I was and am completely fed up with the fact that SEC enforcement division has not brought a case against any naked shorting abuses.

Here's the letter: <>

Phantom shares - A great article by Mr. Jonathan E. Johnson III

This article first appeared on :
Reprinted with permission.
In the late 1800s, American financier Daniel Drew refined the art of selling counterfeit shares. Drew's biographer wrote, "There is no limit to the amount of blank shares a printing press can turn out. White paper is cheap... printer's ink is also cheap." Today, it is possible to counterfeit shares electronically — and it happens with such frightening regularity and impunity that Drew would be proud.

In modern stock markets, stock ownership has been separated from stock certificates through a process known as "dematerialization." As a result, when investors buy or sell stock, they are actually trading "security entitlements" — not actual stock certificates.

The Securities and Exchange Commission's Division of Market Regulation Director Erik Sirri explains: "The beneficial owner's [i.e., the investor's] ownership cannot be tracked to a specific share... [T]hey own a bundle of rights defined by federal and state law and by their contract with the broker. ... That's news to a lot of people." News indeed.

Brokers in U.S. equity markets receive commissions when buyers pay for shares, not when sellers deliver those shares. Thus, incentives to deliver share are so weakened that some brokers and large institutional customers (e.g., hedge funds) regularly use loopholes to avoid delivering shares at all. The result is a "failure-to-deliver" (FTD).

FTDs can be caused in several ways, but they commonly result from short sales in which the seller does not borrow or even locate the stock he sells (the infamous "naked" short sales). Regardless of how an FTD occurs, for each share not delivered the system creates a "phantom" entitlement the market treats as a real share. These "phantom shares" are supposed to be temporary in duration and few in number. Loopholes, however, are exploited on such a scale, and phantom shares are so persistent, they are corrupting the U.S. equity markets in three ways.

(1) Phantom shares warp corporate governance by inflating the number of voting shares. Bob Drummond (Bloomberg Markets) reported in April 2006, "The results of high-stakes company decisions may hinge on the invisible influence of millions of votes [i.e., phantom shares] that shouldn't be counted." In an analysis of 341 corporate votes in 2005 by the Securities Transfer Association, there was evidence of overvoting in all 341 cases.

(2) Phantom shares distort share prices by flooding the market with excess supply. In July 2006, SEC Chairman Christopher Cox said "abusive naked short sales ... can be used as a tool to drive down a company's stock price to the detriment of all of its investors." The creation and sale of phantom shares has become a common means to manipulate share prices in U.S. equity markets.

(3) Phantom shares create systemic risk. According to the Depository Trust and Clearing Corp. (DTCC), on any given day "fails to deliver and receive amount to about $6 billion daily ... or about 1½ percent of the dollar volume." Bradley Abelow, a former DTCC director, says FTDs within the settlement system "occur as a matter of course with great regularity," and calls them "endemic." The stock market has turned into a game of "musical chairs" where claims of ownership exceed shares issued. What happens when the music stops?

In a weak attempt to curb abusive naked short selling and reduce outstanding FTDs, the SEC implemented Regulation SHO in January 2005. Regulation SHO requires the stock exchanges to publish daily a list of "threshold securities" — companies that through no fault of their own have FTDs in excess of 0.5 percent of their outstanding shares. More than 6,000 companies have appeared on these Threshold Lists — many for hundreds of consecutive trading days. For these companies, Regulation SHO does not work.

Freedom of Information Act (FOIA) data received from the SEC reveal that FTDs have been as high as 10 percent of the average daily trading volume on the New York Stock Exchange and Nasdaq. FOIA data also reveal that, for many companies, FTDs are a significant portion of their total shares outstanding — in at least one case more than 45 percent.

Economists, the U.S. Chamber of Commerce, members of Congress, public companies, and hundreds of informed investors have urged the SEC to adopt a G.O.L.D. standard: G, eliminate Regulation SHO's Grandfather clause; O, eliminate Regulation SHO's Options market maker exception; L, require short-sellers to Locate and borrow shares before selling them; and D, require the exchanges to Disclose fully and promptly the aggregate FTDs for every Threshold List company.

To its credit, the SEC is working to fix two significant loopholes in Regulation SHO by eliminating the grandfather clause (final phase-in on Dec. 3, 2007) and by proposing to eliminate the options market maker exception (proposed, but not yet adopted).

However, these half-measures will not stop the creation of phantom shares. Will the SEC finish the job? That remains to be seen. According to a recent Senate Judiciary Committee report, the SEC is riddled with conflicts of interest that prevent it from properly policing brokers who are guilty of securities crimes. If the SEC does not act to protect investors, it falls to Congress to adopt the G.O.L.D. standard and bring an end to market distortion caused by phantom shares.

Jonathan E. Johnson III is senior vice president of corporate affairs and legal at Inc., a Nasdaq-listed firm on the Regulation SHO Threshold List for 642 consecutive trading days and counting.

Jonathan E. Johnson III's letter to the SEC

May 19, 2011
Elizabeth M. Murphy Secretary
U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549-1090
RE: Release Nos. 34–64383; File No. 4–627 Short Sale Reporting Study Required by Dodd-Frank Act Section 417(a)(2)
Dear Ms. Murphy:, Inc. appreciates the opportunity to respond to the U.S. Securities and Exchange
Commission‟s request for comments (76 Fed. Reg. 26787 (May 9, 2011)) on the short selling
studies required by Section 417(a)(2) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 („the Act‟).
The statutory mission of the Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Section 417(a)(2) of the Act advances that mission. Specifically, Section 417(a)(2)(B) requires the Commission to study the feasibility, benefits, and costs of conducting a voluntary pilot program in which public companies would
agree to have all trades of their shares marked „„long,‟‟ „„short,‟‟ and/or „„market maker short‟,‟ and „„buy‟‟ and/or „„buy to cover‟‟ and reported in real time through the Consolidated Tape. believes that implementation of a disclosure pilot program that adds long, short, and market maker trade designations to the consolidated tape will help investors and regulators to understand price movements. Legitimate market participants benefit from such real-time trading transparency. Accordingly, we urge the Commission to implement as soon as is practical a pilot program that allows companies to opt-in to the program.
The Section 417(a)(2)(B) pilot program have the following features:
The pilot program should include each of the short, market maker short, buy, buy-to-cover, and long designations. This will allow for meaningful analysis of trade data that disentangles trading done for the purpose(s) of market making and/or covering from trading done for the purpose(s) of investing and/or speculating.
Ms. Elizabeth M. Murphy
May 19, 2011
Page 2
The pilot program should make the trade data on all companies in the program available publically. This will ensure that the pilot program produces those conditions that best approximate real-world implementation.
The pilot program should report transaction level data (not aggregate data). Trade time is an information component of a trade so the pilot program should reveal when trades occur.
The pilot program should include an assortment of issuers and, perhaps, an element of
random selection to ensure that the program‟s validity is not challenged on the grounds that
the sample was biased or unrepresentative. To the extent that the pilot program is voluntary, however, is highly interested and offers to participate.
The pilot program should include a variety of equity issues, including exchanges traded funds (ETFs). Presently, ETFs are notable both for their popularity as well as their high fails-to-deliver (FTDs), both absolutely and as a share of all FTDs. (See point 15 below.)
The pilot program should be coordinated with Commisions‟s Audit Trail Initiative Team. The Commission‟s proposed consolidated audit trail system would help to improve accuracy and efficiency in trade accounting. A pilot program conducted as per Section 417 may provide an opportunity for the Commission to test the efficacy a new consolidated audit trail system.’s interest in the pilot program.
7. feels that the pilot program will facilitate even more timely publication of current and historical short sale and FTD data. has a long history of advocacy on issues related to short selling, trade settlement failures and Regulation SHO reform; still holds the issuer record for consecutive and total days on the Regulation SHO Threshold List. appreciates that short selling contributes liquidity, efficiency and price discovery to the market. Notwithstanding welcome past actions by the Commission, however, naked short selling, settlement failures and market manipulation persist. Increased transparency may help to curb these pernicious perennial problems.
How issuers would use real-time short and long trade information:
Not all trades are equal. Trades executed by market makers mean something quite different than trades executed by investors. Real-time trade data that disaggregates long and short sales will help issuers to disentangle and understand the reasons for short-run movements in stock prices.
If issuers suspect that market manipulation is occurring, the availability of real-time trade data may help to support these suspicious. Alternatively, real-time disaggregated data may help to dispel myths regarding market manipulation and/or alleviate unnecessary concerns.
Ms. Elizabeth M. Murphy
May 19, 2011
Page 3
Real-time trade data may help issuers to detect and respond appropriately with corrective information to false information in the market, thus assisting in the protection of market integrity.
Potential costs and benefits of a Section 417(a)(2)(B) pilot program to issuers and others:
Issuer Costs. We believe that there are no direct costs to issuers. A pilot program may, however:
Increase issuers' cost of capital
'phony liquidity' disappears.
This is
cost that
issuers should be willing to bear, however, for timely and transparent trade data.
Increase volatility due to herding behavior in short selling and or short squeezes as
investors gain real-time information about short sale volume and price changes.
Decrease volatility as investors distinguish market-maker short sales from investment.
Issuer Benefits. A pilot program may:
Uncover abusive market manipulation.
Indicate when non-public information may have been leaked.
Help issuers to understand market sentiment with lower latency.
Engender increased confidence in regulators and market integrity.
Regulator Benefits. A pilot program may:
Serve as a timely tool for regulators to detect and address irregular trading.
Facilitate the current audit trail project for execution of trades.
Reduce errors and omissions in trade tickets and hinder compliance evasion.
Streamline the reporting operations of institutions and exchanges tied to SROs.
Protect the integrity of the markets.
Assist in converging regulation and monitoring with European and Asian systems.
Comply with the Obama Administration‟s call for greater government transparency.
Investor/Academic/Data Provider Benefits. There are two dimensions to real-time trade information: volume and price. Currently, short sale data is collected and reported separately by the SROs. When available, this data can be unreliable and prone to double counting and other errors. This seems to violate the spirit, if not the letter, of Regulation NMS. Real-time short sale reporting would help to mend flaws in the current short sale data regime. The additional information contemplated by the pilot program (e.g., short vs. long trade marking; which trades are due to market-making activity; how many purchases are to close out short positions) will enhance overall market efficiency by increasing publicly available data. This information will enable investors to make better decisions and provide new opportunities for proprietary analysis. This information will also level the investor playing field, since broker-dealers that undertake significant market making activity currently have more real-time information than retail investors and issuers.
Other Issues
15. Settlement Failures in ETFs. After 2008, overall equity settlement failures, as well as the number of stocks on the Regulation SHO Threshold List, declined markedly. This is likely a consequence of meaningful changes to Regulation SHO and enactment of Rule 204T
Ms. Elizabeth M. Murphy
May 19, 2011
Page 4
which imposed a hard close-out requirement for FTDs. Nevertheless, since 2008 settlement FTDs in ETFs have grown precipitously. This is partially due to the increased popularity of ETFs, which are a relatively novel investment product. The rise in FTDs in ETFs, however, is far greater than the increase in ETF trading volume alone. Below are some daily average statistics for 20101:
ETF volume was 9% of all trading volume on U.S. equity markets.
On average, FTDs in ETFs were 62% of all FTDs; at most they were 93% of all FTDs.
Average daily FTDs in ETFs were worth $1.27 billion; at peak they were $7 billion.
The Regulation SHO Threshold List featured an average of 45 ETFs (over 53% of the full list); on some days the Threshold List contained 96 ETFs (80% of the list).
Short sales in ETFs were roughly 42% of total volume in ETFs. In some cases short sale volume in ETFs was nearly 100% of total daily trading volume.
The magnitude of ETF settlement failures is particularly concerning given the presence of leveraged ETFs that offer double and triple exposure, which may give naked short sellers double and triple the short capacity. Anecdotal examples abound of ETFs tracking poorly the performance of underlying assets, including commodities and indices. ETFs may represent a new form of destabilizing and dangerous derivative risk to the settlement system and markets in general. Regulators and policy makers should take urgent action to understand why FTDs in ETFs are large and persistent.
16. Market Manipulation and Terrorism. In 2009, the Department of Defense Irregular
Warfare Support Program (IWSP) commissioned a report “to consider the implications of
financial terrorism and/or economic warfare and to identify and realistically list prospective threats to U.S. economic security.”2 The report, Economic Warfare: Risks and Responses. Analysis of Twenty-First Century Risks in Light of the Recent Market Collapse, identified naked short selling and manipulation of the settlement system as important factors in the 2008 financial crisis.3 According to the authors, “Bear raids were perpetrated by naked short selling and manipulation of credit default swaps, both of which were virtually unregulated. The short selling was actually enhanced by recent regulatory changes including rescission of the uptick rule and loopholes such as “the Madoff exemption.”4 The Report warns that loopholes in the settlement system could be used by terrorists and/or hostile foreign governments to weaken the U.S. economy. The Report recommends that
1 The sample is defined by the 963 Exchange Traded Funds (ETFs) that traded on U.S. markets in 2010. Fail-todeliver data are provided by the SEC Freedom of Information Act (FOIA) Office. Stock volume data are provided
by Financial Content. Short sale volume data and SEC Regulation SHO Threshold Lists are posted daily by NYSE,
NASDAQ, ARCA, AMEX, CHX, and other major exchanges. For more information, see Appendix A.
2 Kevin D. Freeman, CFA, “Economic Warfare: Risks and Responses,” Cross Consulting and Services, LLC, June
3 See Alexander Frean, “„Financial terrorists‟ pose grave risk to US,” Times of London, February 2, 2011,; Bill Gertz, “Financial terrorism suspected
in 2008 economic crash,” Washington Times, February 28, 2011,;
“Financial Terrorism,” CNBC, March 2, 2011,
4 Economic Warfare, page 2.
Ms. Elizabeth M. Murphy
May 19, 2011
Page 5
the Commission “eliminate naked short selling by mandating delivery of shares [and] eliminate broad exceptions.”5 agrees with this recommendation.
Settlement Failures and Systemic Risk. A March 2011 paper reaches a similar conclusion. In “Canaries in the Coal Mine,” Bradley et al. address the “extremely high and rising number and frequency of “fails to deliver” in mortgage-backed securities transactions (MBS) and in exchange traded funds (ETFs).”6 They recommend that “appropriate regulatory authorities” should “impose substantial penalties or fees for all transaction fails.”7 agrees with this recommendation.
Short Position Reporting. Section 417(a)(2)(A) of the Dodd-Frank Act requires that the Commission conduct a study of short “position” reporting. The Commission observes that term “position” is not defined by Congress with specificity.8 The scenario that Section 417(a)(2)(a) appears to envision is disclosure of short positions in listed U.S. tickers, including equity and options positions, held by hedge funds, market makers, broker-dealers and other major institutions. Comprehensive and accurate reporting of short positions by all market participants does not seem feasible and, for that reason, would not be useful to issuers. proposes an alternative to the scenario described by Congress. Currently, the Commission requires bi-monthly short position reporting by FINRA member firms only as per the current short interest reporting regime.9 proposes that the Commission study the feasibility of requiring the SROs to make public the breakdown of short interest by FINRA member firm. Short position disclosure by FINRA firm would have the following benefits:
The system would require few changes to the currently regulatory regime.
Issuers would receive accurate, bi-monthly data on the short selling landscape that allows for meaningful comparisons across time.
The system would offer regulators and issuers an “early warning” system for possible manipulation or fraud concentrated at particular broker-dealer(s).
5 Ibid, page 75.
6 Harold Bradley et al., “Canaries in the Coal Mine: How the Rise in Settlement “Fails” Creates Systemic Risk for
Financial Firms and Investors,” The Ewing Marion Kauffman Foundation, March 2011.
7 Ibid, page 16.
8 Securities and Exchange Commission, “Short Sale Reporting Study Required by Dodd-Frank Act Section
417(a)(2),” Federal Register (Vol. 76, No. 89), May 9, 2011, p. 26789.
9 For example, see “Report Overview,” NASDAQ Short Interest Publication Schedule,
Ms. Elizabeth M. Murphy
May 19, 2011
Page 6
Conclusion welcomes the opportunity to comment on Section 417(a)(2) of the Dodd-Frank Act. Real-time trade reporting will likely improve



There are many cases against banks (including Swiss banks) who have been convicted of fraud and other criminal actions. Nobody seems to care as it is business as usual for some banks to break the law and just pay the price, like a parking ticket. Of course it brings bad publicity but they have enough money to buy the best publicists and fix their image. Here's one example of many many:

In what a federal judge called “a brazen fraud,” the bank was found liable for bad mortgages sold by its Countrywide unit to Fannie Mae and Freddie Mac. A federal judge on Wednesday ordered Bank of America to pay $1.27 billion in damages over shoddy mortgages sold to Fannie Mae and Freddie Mac just before the housing crisis.


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