UBS, in Theory, a Conspiracy to Naked Short “Tens of Millions” of Shares

They said that seeing naked short selling is like seeing UFOs. If that is the case, then UFOs, at UBS, are real.

It wasn’t long ago when they were saying that naked short selling never happened. They said it simply did not exist, that only wild-eyed conspiracy theorists believed in naked short selling. That was before 2008, when the CEOs of some big banks started hollering that naked short selling was causing the stock prices of their banks to nosedive. With the CEOs of the big banks hollering, the SEC, in June, 2008, issued an Emergency Order banning naked short selling (that previously did not exist) in the stocks of 19 big financial institutions (i.e. the financial institutions that were doing the naked short selling—to each other). But the SEC did nothing about the naked short selling of other stocks because, apparently, that naked short selling existed only in the fevered imaginations of people who believed that their savings were being wiped out by little green men.

Then, in August 2008,  the SEC lifted its Emergency Order banning naked short selling of stock in the 19 big financial institutions, and those financial institutions began naked short selling each other again. Their stocks (which had increased in value while the Emergency Order was in place) once again nosedived, and one of them, Lehman Brothers, saw its stock go into a classic death spiral (i.e. a spiral that caused death). Almost immediately after Lehman collapsed, the SEC issued another Emergency Order, this time banning all short selling in financial stocks, and in this new Emergency Order, the SEC stated in plain English that naked short selling can cause stocks to go into death spirals, making it difficult for the targeted companies to raise new capital, and thereby result in bankruptcy. Which, of course, was what had just happened to Lehman, as the SEC knew full well.

Some weeks later, the SEC lifted that Emergency Order and put into effect some new rules governing naked short selling. Ever since, the SEC has maintained that naked short selling rarely occurs, and it certainly has never sanctioned anyone for the naked short selling that (according to the SEC) created an “emergency” in 2008. So once again, the conventional wisdom is that only wild-eyed conspiracy theorists believe that naked short selling occurs, and only UFO abductees with tin foil hats believe that naked short selling occurs in massive volumes, causing damage to the markets.

It has long since been forgotten that CEOs of big banks were, back in 2008, hollering that naked short selling had caused their stock prices to nosedive, and it has long been forgotten that the SEC issued two Emergency Orders in 2008 to save the banks from naked short selling, suggesting in one of those Emergency Orders that naked short selling had contributed to the collapse of Lehman Brothers. And now we know why it has been forgotten. Now we know why the term “naked short selling” has once again been scrubbed entirely from the public discourse in quite Orwellian fashion. It is, of course, because the big banks are still perpetrating (with the full connivance of the SEC, whose data says it isn’t happening) massive volumes of naked short selling. This, anyway, is what we can conclude from a recent FINRA settlement.

FINRA, for those who don’t know, is the Financial Industry Regulatory Authority, which sounds like a government regulatory agency, though it is owned and operated by Wall Street, and its activities as a “Regulatory Authority” amount mostly to leveling small fines for massive crimes perpetrated by Wall Street, thereby relieving the SEC of any need to do its job. If  FINRA has issued a “settlement”  letter to a perpetrator, the issue is “settled” so far as the SEC is concerned, and such was the case when FINRA recently issued a “settlement” letter asking the big investment bank UBS to pay a small fine for violating the rules against naked short selling that the SEC isn’t enforcing.

More precisely, FINRA’s recent “settlement” letter (which you can read here) asked UBS to pay a fine for “not admitting or denying” having “entered tens of millions of proprietary and customer short sale orders without having reasonable grounds to believe that the securities could be borrowed and available for delivery.” When a brokerage sells stock short “without having reasonable grounds to believe that the securities could be borrowed for delivery” that means the brokerage has deliberately engaged in naked short selling (i.e. selling phantom stock that increases supply, driving down prices), and in this case it appears that UBS (between the years 2004 and 2010, according to FINRA) transacted naked short selling to the tune of “tens of millions”(emphasis added) of phantom shares in nobody knows how many companies were affected by this massive deluge.

In fact, UBS might have naked shorted far more than tens of millions of shares, though for some mysterious reason, FINRA reports that it doesn’t actually know how many additional shares were naked shorted. In its settlement letter, FINRA simply reported that aside from the “tens of millions” that were naked shorted, UBS “effected an additional significant but unquantifiable number of short sales without valid locates [i.e. naked short sales] during the Relevant Period.” Unquantifiable? As in too big a number for a calculator to handle? Or is it some smaller but still unpalatable number that FINRA’s ”regulators” dare not speak (or regulate)?

In any event, FINRA did report (or, rather, understate) the obvious fact that the “duration, scope and volume of the trading [i.e. a volume of naked short selling that is ‘unquantifiable’ but significantly more than “tens of millions’ of shares naked shorted] created a potential for harm to the integrity to the market.”

In fact, UBS at least “created a potential” to crash the markets by flagrantly violating the SEC’s supposed naked short selling regulations, and FINRA is asking UBS to pay a small fine (without admitting or denying what it did) so that the SEC can take no action whatsoever. Meanwhile, of course, the captured media continues to pretend that naked short selling (i.e. a criminal conspiracy) exists only in the minds of “conspiracy theorists” (i.e. people in our brave new world who are are crazy because they speak the truth).

  1. I was privy several years ago when an institutional call at UBS was pushing their salesmen. The speaker flat out said, “and if you can’t get a locate, you just call me.” Wink nod. I mean, business is business. What good is the best idea in the world if you can’t execute?

  2. The SEC is bought and paid for…. PERIOD!!!

    JPM wasn’t satisfied with demonstrating its implicit control over the US bond issuing authority by promoting Matt Zames to the post of COO, the same Matt Zames who courtesy of his Chairmanship of the TBAC, also effectively runs the US Treasury where he “advises” the brand new Treasury Secretary who has no idea what he is doing. Oh no. Just to cover all its bases, Jamie Dimon’s firm decided to also take over the SEC as well.

    From a Notice of Withdrawal of appearance of one Andrew J. Ceresney filed in the case of the People of New York versus JPMorgan, in which find that Mr. Ceresney, formerly partner at Debevoise, the same firm that current SEC chief Mary Jo White came from, is no longer with the firm.

  3. The band played on…
    Our ship of state , the Titanic, has hit the mother of all financial icebergs. Full speed, while telling the lookouts crying iceberg, that icebergs do not exist here.
    Soon we will all be sucked into the icy depths of bottomless debt.
    The elite have taken all the lifeboats.
    But my what a lovely song the band is playing.
    [it is called ‘The market is up’]
    Would you like to dance?

  4. This is among the many good reasons why I keep heading back to this blog site. This blog post is a wealth of ideas and I can¡¯t wait to work on utilizing them. I like how it is visible that you made a lot of time and effort in research. I hate it when I read on postings that are 550 words long but are deficient in substance. It¡¯s like they just want to wind you in and they are not really giving out something good. So thanks a lot!

    1. Wow the depth of your intelligence summed up with a concise, to the point, post. congratulations, you’ve just shown this fine community here the limits of the grey matter housed between your ears..idiotic mouth-breather.

  5. Ramy El-Batrawi, a true entrepreneur

    Ramy El-Batrawi is an entrepreneur, investor, and humanitarian. In addition, Mr. El-Batrawi believes in his companies and strives to protect his investors to the best of his abilities. He has battled short sellers on behalf of his shareholders in spite of the terrific pressure put on him.

    The Battle With the Shorts
    This epic battle between Mr. El-Batrawi and illegal short selling is an amazing story of greed and corruption. So far, Mr. El-Batrawi has been sued and lost millions of dollars in this battle. However, several of the shorts have been convicted of criminal acts including extortion and perjury, including two FBI special agents.

    Mr. El-Batrawi has contributed to various charities and individuals. He has been given awards for his generosity to those less fortunate and has always supported his community.

    Entrepreneur and Investor
    He has had a successful 20 year career as an investor and entrepreneur. He has helped to create and/or save thousands of jobs through his investments and deals that he has structured.

  6. We are missing a key market ingredient, and it’s that we have nobody and nothing that guarantees settlement in this country.

    Most people assume there is a 3rd party or a mechanism in place that assures or guarantees delivery (settlement)- but there isn’t one.

    The DTCC merely facilitates settlement and provides settlement services. But it does not guarantee settlement. Nobody does.

    However, it does guarantee clearing. That is, it assures and guarantees that the money part of a transaction is transferred as contracted.

    Build in an enforcing mechanism or a 3rd party guarantor to guarantee settlement as contracted into the markets, and all these shenanigans would go stop. And without this key, it will never stop.

    We need this missing key, it’s that simple.

  7. Mark,

    Interestingly enough, it is only recently that shareholders of BCIT, which was naked shorted into oblivion in 2005, discovered that UBS, along with Knight, own the lions share of the NS positions. Short and skinny on BCIT is that ~1B shares were sold as real, when in fact only 1M shares were ever issued by the company…and only 645K shares were on deposit at DTC. What is even more telling, is that UBS got busy AFTER the DTC suspended clearing services for BCIT. Never mind the infinitesimal amount of shares on deposit for a moment, and remember that in the absence of certificates deposited at a clearing agency being available, participants MUST have PHYSICAL possession of certificates to complete transactions. UBS had no such shares, and it was impossible for them to do so. That didn’t stop them from selling ~400M air shares AFTER the DTC freeze. Of course they did have one thing going for them…the SEC sensing market carnage, suspended buy-in requirements until further notice. Air share sales picked up rather nicely after that…I wonder why?

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