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
646-238-0212

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

http://www.connectlive.com/events/secroundtable0909/

Wednesday, September 30, 2009

Panel One: Controls on “Naked” Short Selling: Examination of Pre-Borrow and Hard Locate Requirements.

WindowsMedia | RealMedia
Captioned Version: WindowsMedia | RealMedia
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Panel Two: Making Short Sale Disclosure More Meaningful: Public versus Non-Public Reporting; Consolidated Tape Disclosure; Timeliness of Information.

WindowsMedia | RealMedia
Captioned Version: WindowsMedia | RealMedia

One reporter wrote it off as a “half-baked conspiracy.” He even made mention of the lack of credibility regarding the tip I received from journalist who was told the seizure was politically motivated, without bothering or caring to verify it.

I told him I had the name and contact number of the reporter, but for some strange reason, he wasn’t interested. As you might imagine, this reaction, which I deemed to be unprofessional, unappreciative and disrespectful, was dealt with appropriately. I basically put him in his place as you might imagine.

When a reporter is telling a Wall Street insider his market insights are rubbish, especially without even bothering to investigate them, it implies one of two things.

He is either a complete idiot………… or

He wants to stay away from something potentially disastrous to his career.

My guess is that it was a combination of both.

(Perhaps I’ll disclose his name if you email me, but only if you promise to email him and tell him what a jackass he is)

It was then I realized that journalists would only be willing to go after obvious fraud that everyone knew about; like mortgage fraud. They aren’t willing to uncover massive fraud that would have drastic ramifications for the biggest banks in America.

I’m a bit anxious to publish the emails from this, as well as the others I’ve collected over the past three years from the media when I tried to warn people of this mess. I’m not talking about generic doom and gloom extremist predictions that you may have come across from the media snake oil salesmen. I’m talking about specific predictions which have materialized.

Several weeks later I received a call from a couple of SEC attorneys who had been assigned to investigate WaMu fraud. They wanted to know more about the details of my allegations. What I suspect is that they really wanted to know how much direct proof I had so they would know whether or not to pursue the case; to cover their behinds. Otherwise, for whatever reason they weren’t going to pursue it. I was quite certain about that.

After explaining things, I requested to see the short interest data for WaMu in the months prior to the collapse.

Sensing these SEC officials lacked the expertise (or motivation) required to prove my case, I wanted to prove that JPMorgan committed securities fraud and benefited from this by its taxpayer-funded purchase of WaMu (which would also imply taxpayer fraud). But the attorneys refused to hand it over. Go figure….

Do make a point to read the whole article.

You can short $1 million worth of stock at $1, putting up $20,000 as collateral (2%). When the stock goes to $.01, your collateral is only $10,000 and you can withdraw the original $1 million + half your collateral and leave town, leaving the system to fix your mess.

The old fails are so toxic, that I doubt the obligations to retail shareholders can ever be honored.

Perhaps Sen Kaufman will come out with an amendment: “Investors Bill of Rights”!

PS: Please forgive the typos in my last post………

Nobody guarantees settlement nor is anyone a settlement agent and the big prime brokers that can exploit this big void want to keep the status quo.

If there were a settlement agent or if someone guaranteed settlement of trades, as Congress asked for in 1934, we could all go home. The scandal for the government is ignoring the federal statute mandating that a settlement system to be implemented. Neither the industry nor the SEC has acted on this mandate since 1934.

Someone should just have asked, why the SEC nor the industry has implemented the mandate by Congress for a settlement system? It’s a no brainer that all these problems stem from this fact.

With a settlement system, there all problems re: settlement failures go away. Without a settlement system, the problems will never go away. Simple as pie. The lack of a settlement system is like keeping the door open for criminals. Congress mandated the door be closed back in 1934, but it is still open.

Instead of saying “Naked Shorting isn’t a Problem”, they say “Is Naked Shorting a Problem?” to make it seem like they haven’t been editorially compromised by the advertorial piece.

http://www.forbes.com/2009/10/01/kaufman-isakson-markets-naked-short-selling.html

We already know that the same mortgages were used to back more than one bond which isn’t that different than using the same share to back more than one entitlement.

TOXIC ASSET = WALLSTREET FRAUD

Coincidence?

To create FUD by claiming the banks are insolvent is an Einhorn, Chanos, etc., game.

Summarize the problem as best you can for Barron’s readers.

With most of America’s biggest banks insolvent, you have, in essence, a multitrillion dollar cover-up by publicly traded entities, which amounts to felony securities fraud on a massive scale. These firms will ultimately have to be forced into receivership, the management and boards stripped of office, title, and compensation. First there needs to be a clearing of the air — a Pecora-style fact-finding mission conducted without fear or favor. [Ferdinand Pecora was an assistant district attorney from New York who investigated Wall Street practices in the 1930s.] Then, we need to gear up to pursue criminal cases. Two years after the market collapsed, the Federal Bureau of Investigation has one-fourth of the resources that the agency used during the savings-and-loan crisis. And the current crisis is 10 times as large.

http://www.publicradio.org/columns/marketplace/scratchpad/2009/10/getting_naked_part_2.html