Investing 101 - Apr 27, 2006 - Printable Version
- Faulking Truth recommends abolishing the SEC
by Mark Faulk For years, stock market reform advocates such as Dave Patch at www.investigatethesec.com have been calling for an inquiry into the Securities and Exchange Commission. Over the past few years, Patch has been joined by a handful of other outspoken advocates, and gained the support millions of others who can clearly see the trouble that our financial system is in. Still, the SEC has done nothing to fix the overall problem, instead choosing to apply band aids in the form of minor penalties handed out to low level criminals, and in fact, has done everything within its power to hinder attempts by the companies themselves to police their own situations. Either they don’t get it, or they just don’t care. It’s time for drastic measures, because it’s become painfully obvious that the SEC is not going to help the shareholders of this country OR the companies that are being forced out of business on a regular basis.
As we listened to SEC Chairman Chris Cox talk in circles (and end up right back where he started…which is nowhere at all), during his appearance in front of the Senate Banking Committee two days ago, it occurred to me that a full scale investigation would be a waste of taxpayers’ money. It’s too late for that.
Let’s start with a couple of Chairman Cox’s statements in response to Senator Bob Bennett’s questions about the still rampant issue of naked short selling…or as I prefer to call it, STOCK COUNTERFFEITING, commonly known as stealing. Keep in mind that I was first informed of Senator Bennett’s involvement in this issue over 20 months ago, and to date, NOT A DAMN THING HAS BEEN ACCOMPLISHED BY OUR ELECTED OFFICIALS TO RESOLVE THIS MASSIVE PROBLEM.
Is everyone ready for this? Seriously, be sure you’re not in the middle of drinking something hot, because you might end up spitting it all over yourself in disbelief. And it wouldn’t hurt to put scissors and other sharp objects out of reach, just in case you have an overwhelming urge to stab yourself repeatedly upon reading his Orwellianesque logic.
Okay…NOW are we ready? Fasten your seatbelts, it’s going to be a bumpy ride.
Chairman Cox:
From the standpoint of orderly markets, it's vitally important that shares be delivered. These are contracts, and they have to be fulfilled. And there has to be a rule of law.
I also, moving to your next point, agree with you that it is faint comfort for someone with a micro-cap company to hear that statistically we're doing great, that we're reducing these failures to deliver, and that life is much better now than it's ever been before, because statistically we can prove it's so. I mean, in a thinly traded company, life is different. And so enforcing these rules in very different circumstances is also vitally important.
Having said that, I do think it is important to recognize the progress that has been made under Regulation SHO, which the commission, as you know, adopted in 2004, before I became chairman. That rule became fully effective in January of last year. It has a modest ambition. It is designed not to eliminate but to reduce failures to deliver on short sale transactions and to target potentially problematic short selling, abusive naked short selling.
What I can commit to now is that when we have internalized and understood the results of our examinations, which are now ongoing, of compliance with Regulation SHO -- and we've completed the examinations of some 45 firms that include comprehensive target exams of 19 clearing firms -- that I will recommend changes to our rules if those exams demonstrate that changes are necessary for the reasons that you describe.
Wow. Um…..I really don’t know how to approach this one, it’s just wrong in so many different ways that it’s making my head spin. I guess I’ll just translate it into layman’s terms and let everyone draw their own conclusions.
Here we go, this is my interpretation of our esteemed SEC Chairman’s comments:
“Brokers who buy stock for their clients have a contractual obligation to DELIVER WHAT THEY ARE SELLING. IT IS THE LAW.
COMPANIES ARE BEING KILLED BECAUSE OF NAKED SHORT SELLING. Therefore, we have adopted rules that we know don’t work, and we knew it when we passed them. Not only that, we’re not even enforcing the rules that we knew wouldn’t work to begin with. Instead, we’re 'internalizing the results' and if I find that the rules (which again, weren’t designed to eliminate the problem in the first place) need to be changed so that they can accomplish their 'modest goal' of slightly reducing the massive corruption that exists in our stock market, then I’ll tweak them a little bit sometime in the undetermined future.”
So there you go, Senator Bennett says "He who sells what isn't his'n, must buy it back or go to prison," and Cox responds with “We have a rule that is a weak’n, but all it needs is a little tweakin’.”
A Faulking Truth reader sent me this article about the just completed Senate inquiry into FEMA, in light of their massive failure to protect property and people during Hurricane Katrina. Now, keeping in mind our current ongoing economic disasters, read this excerpt from “Senate panel recommends abolishing FEMA”:
WASHINGTON - Hurricane Katrina’s latest fatality should be FEMA, the nation’s disaster response agency, a Senate inquiry concluded in calling for a government overhaul to avoid future failures like those the devastating storm exposed.
Describing FEMA as a “shambles and beyond repair,” they said the reforms “will help ensure that we do not have a repeat of the failures following Hurricane Katrina.
Okay, I’m pretty sure everyone is way ahead of me here, but for those of you who work for the SEC who are reading this and just don’t get it, I’ll make the “necessary changes” to this excerpt so that it applies to that OTHER disaster:
WASHINGTON – The Stock Market’s latest fatality should be the SEC, the nation’s financial markets regulatory agency, a Senate inquiry concluded in calling for a government overhaul to avoid future failures like those the devastating stock counterfeiting scandal exposed.
Describing the SEC as a “shambles and beyond repair,” they said the reforms “will help ensure that we do not have a repeat of the failures following the corruption that has flourished for years in our system.
See how easy that was? A few key words interchanged, and we’ve begun the process to repair the massive damage that the SEC has allowed flourish unchecked for years. They’ve had their chance, and it’s clear whose interests they’re looking out for….and that they’re not, as their mission statement claims, “protecting investors and maintaining the integrity of the securities market”.
To read SEC Chairman Cox's testimony on naked short selling in front of the Senate Banking Committee on April 25, 2006, go to:
http://www.faulkingtruth.com/Articles/LettersToEditor/1029.html
(Editor's note: Thanks to Faulking Truth reader Wade Harris for sending me the FEMA article that triggered this tirade.)
Mark Faulk is the Editor of The Faulking Truth, and the author of the upcoming book entitled "The Naked Truth: Counterfeiting the American Dream," due out in June, 2006. For more information on the book and on the stock market scandal, go to http://www.faulkingtruth.com , and to pre-order your copy, go to http://www.theownersgroupinc.com/cart/
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Investing 101 Archives:
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Pump and Dump or Short and Distort? (Mark Faulk, Apr 18, 2004)
Response From Berliner Freiverkehr and The Berlin-Bremen Stock Exchange (The Faulking Truth, Jun 3, 2004)
The Berlin Connection? SEC and NASD to Meet With German Brokerage Firm Tomorrow (Mark Faulk, Jun 3, 2004)
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Who's Looking Out For You? SEC Critics Seeking Investigation (Mark Faulk, Jun 27, 2004)
He Said, She Said: SEC, NASD At Odds Over Status of Proposal (Mark Faulk, Aug 5, 2004)
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A Twelve Step Program to Clean up the OTC Stock Market (Mark Faulk, Sep 14, 2004)
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Dateline: The Waiting is the Hardest Part (Mark Faulk, Nov 16, 2004)
Death of an Investment Class (Dave Patch, Dec 30, 2004)
Elgindy Trial Illustrates Incompetence at the Federal Levels (Dave Patch, Jan 4, 2005)
The Year of the Investor (Mark Faulk, Jan 5, 2005)
Regulation SHO’s Threshold Lists Leave More Questions than Answers (Dave Patch, Jan 11, 2005)
Feeding the Stock Market Beast (Mark Faulk, Jan 11, 2005)
Economic Corruption US Style (Joel S. Hirschhorn, Feb 27, 2005)
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FINALLY! Dateline to Air Stockgate Segment April 10th (Mark Faulk, Mar 28, 2005)
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Stockgate: Turning up the Heat (Mark Faulk, May 31, 2005)
Stockgate: Donaldson out......Cox in (Mark Faulk, Jun 2, 2005)
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Faulking Truth recommends abolishing the SEC (Mark Faulk, Apr 27, 2006)
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