Nice touch.

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

PS — here’s my new song written for an environmental campaigne against littering — I should add a verse about cleaning the financial markets too !! Let me know if you like the song

http://home.datacomm.ch/rezamusic/Lets_Keep_Our_Planet_Clean.html

They disclose that they will use your shares if you have a margin account. If you put your shares in a cash account and the brokerage or the brokerage’s clearing house pledges them as collateral or worse doesn’t bother owning them, then yes, I believe that is fraud. The problem is that if you push, they will find real shares for you and it will be some other sucker that is without because they do have SOME shares.

I find the way to avoid the eye glaze is to just tell them “Did you know your brokerage often bets against you, hoping you lose money when you buy shares. Often, they will take your money for the purchase, then not even buy the shares or worse, short the shares to push them down. They pretend the shares are there on your brokerage statement, but secretly hope the shares go down because the difference in what you buy them for and what you sell them for is their profit. They call it DESKING.”

“If you are lucky enough that your own brokerage is on your side, you can still be bet against by the rest of Wallstreet (clearing brokerages, prime brokerages, hedge funds, etc.) The system is set up to take your money and the SEC is the industries PR firm, not the regulator investors believe it to be.”

http://www.youtube.com/watch?v=OqZUbe9KIMs

More important than anything else, however, has been the government’s cooperation through the Securities and Exchange Commission. Strange as it may seem, great strides have been made in the growth of the Exchange’s uncontrolled power since the passage of the Securities Exchange Act of 1934. By pretending to address itself to the investor’s needs and appealing to his greed, the SEC has almost succeeded in masking the objectives of the Stock Exchange.

We find ourselves in a situation where government not only has no intention of controlling the distinctive features of the covert Stock Exchange power, but instead exists to enhance it by implementing its monopoly powers over the financial markets and the entire community of investors. The Exchanges monopoly could not have been achieved without the direct assistance of the Federal Reserve System and the Eastern banking establishment.

More important than anything else, however, has been the government’s cooperation through the Securities and Exchange Commission. Strange as it may seem, great strides have been made in the growth of the Exchange’s uncontrolled power since the passage of the Securities Exchange Act of 1934. By pretending to address itself to the investor’s needs and appealing to his greed, the SEC has almost succeeded in masking the objectives of the Stock Exchange.