How the SEC Abets Stock Fraud
If you want a good example of how the Securities and Exchange Commission's misplaced priorities are screwing investors, I have the evidence blow.
It's in one of the several dozen comment letters that have come in to the agency on a proposed amendment to "Regulation SHO." That's the SEC's campaign to throw a bone to anti-shorting nutjobs.
In my book I describe how Reg. SHO is a thoroughly stupid bit of rulemaking. In neither this amendment nor previously does the SEC cite so much as one single shred of evidence that there is a "naked short selling" problem. Instead there are just a mass of meaningless, super-technical statistics, which are systematicaly distorted by the Baloney Brigade -- the better to advance its objective of diverting attention from real stock fraud.
A good example of how that diversion scheme works can be found in one of the comment letters, from a person who gave his name as Ron Melchior:
Dear SEC, I am an unsophisticated investor but am very concerned at naked short sales. I have tried to educate myself on how naked selling works and the ramifications to shareholders of companies being shorted. As far as I am concerned the system is being abused badly. . . My wife and I own several small companies we bought over several years ago and have recently been heavily naked shorted and we have lost over half our value. Naked shorting has hurt us badly and it needs to stop. The playing field needs to be level and fair for all investors big and small. I urge the SEC to do that job. Thank you.
Imagine that. This poor guy owned "several small companies" that have "lost over half" their value and who does he blame? Them. The "naked short sellers." Not the company, not its management -- and above all not his own poor judgment. Them.
Time for SEC chairman Christopher Cox to show some leadership on this issue. Time for the SEC to stop contributing to a mass-disinformation campaign, aimed at providing a ready-made scapegoat for the stock scamsters of America.
© 2006 Gary Weiss. All rights reserved.
Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.