iPhonAsia comment: Representative Gary Ackerman takes the SEC to task. iPhonAsia has written to the SEC several times in the last two years regarding hedge funds and market abuses. We received one form letter response in May 2008, some 5 months after our letter. Hence, in July 2008 we wrote an open letter to the SEC. Sadly our concerns have proved to be quite real. See letter below or > READ HERE
The video above is just a short clip from today’s hearings. Ackerman’s full dialogue with the SEC is compelling, confrontational and cuts right through the SEC’s legalese. This is well worth the click. Hit the play video button below.
CNBC – 5 hours, 42 MINUTES AGO
Here’s a video calling on the SEC to ban the SKF! (double short financials), See > VIDEO HERE
Dear Chairman Cox:
Thank you for your recent acknowledgement that naked short selling is a problem that needs to be addressed. There’s much more to be done and I would like to emphasize a few points.
First - Ignore the men in the expensive suits. The ones who are now “working you” to protect their turf. Reg SHO exemptions do not provide for free and efficient markets. Rather they have opened the door for abuse. The SEC MUST end grandfathering and eliminate the options market maker exception to the close-out requirement of Regulation SHO. The SEC’s own data shows that as of January 31, 2008, the options market maker exception was claimed in 16 threshold securities for a total of 6,365,158 fails to deliver. As of February 29, 2008, your own report shows the exception was claimed in 20 threshold securities for a total of 6,963,949 fails to deliver. That’s abuse!
Second - Go to Congress and use your bully pulpit to push for regulation of hedge funds. Go also to the FSA and IOSCO and get all key international regulatory authorities on the same page. The drunken party in the Cayman Islands needs to end.
Third – Reinstate the uptick rule. Your studies were flawed and the industry smooth-talked their way into billions in manufactured profits by way of the uptick removal. I can just imagine the celebration on Grand Cayman the night after the SEC repealed the uptick rule. Hedge fund managers in Tommy Bahama attire must have been puffing Cubans, swilling expensive brandy and toasting their newfound wealth. Repealing the uptick rule was dumb and dumber!
Fourth – Expand and make permanent the emergency Reg SHO enhancements to all stocks – end all naked shorting … period!
Fifth – All of the above need to proceed at a rapid pace!
Giving your rambunctious teenager the keys to the Ferrari, the pool house and the liquor cabinet, and then leaving on holiday and expecting there to be no trouble is just foolish. That’s exactly what the SEC is doing by allowing hedge funds to go unregulated, giving them freedom from the uptick rule, and virtually no action on naked shorts’ fails to deliver.
I believe the SEC has lost track of their mission –
… “to protect investors, maintain fair, orderly, and efficient markets,” …
That’s to protect investors. There are tens of millions of investors who, during options expiration, watch their stocks being pinned to strike prices by large institutions and hedge funds who are manipulating the prices to maximize their own profits.
Ask yourself a simple question. How or why is it that hedge funds control only a fraction of the asset base compared to mutual funds, institutions and retail investors (there’s that “investors” word again) and yet they account for 70% of the daily trading volume on the NYSE? Is this hedge fund investment activity? No! It’s rapid and massive market manipulation. And much of this activity is done collusively! The SEC and FINRA and other SROs are out manned and under-budgeted … but that is not an excuse to shrug your shoulders on the sidelines. Put some heads on spears! The markets still runs on greed and fear. Clever hedge funds have no fear … they’ve effectively transferred this fear to retail investors whom they know will surrender their stocks in the face of their pre-determined ploys to whipsaw selected equities.
Remember your mission Chairman Cox. “To protect investors, maintain fair, orderly, and efficient markets.”
Think about British Colonel Nicholson (Alec Guinness) in the film The Bridge on the River Kwai … The Colonel, as a prisoner of war, leads his men in the construction of a bridge to re-supply the Japanese in Burma (WWII). A small team of allies stealthily make their way to the POW camp at night and succeed in wiring the bridge with explosives. They intend to blow the bridge in the morning just as the supply train crosses. Yet the river recedes over night exposing the wires. Making a final inspection, Col. Nicholson notices the wires and brings it to the attention of the Japanese commandant (Saito). The two men frantically hurry down to the riverbank, pulling up and following the wire towards the detonator. When they get too close, a firefight erupts. Nicholson yells for help and tries to stop the bridge detonation. Colonel Nicholson then recognizes a former escapee (Shears – William Holden) and then he’s hit by fire. Nicholson suddenly comes to his senses and exclaims “What have I done?” Nicholson stumbles over to the detonator and falls on the plunger as he dies… just in time to blow up the bridge and send the train hurtling into the river.
The proud Colonel almost forgot whose side he was fighting on. “What have I done?”
Chairman Cox remember whose side you’re on. It’s not the Hedge Funds … they are not investors. Fall on the plunger and blow up the bridge you’ve built to billions in manufactured profits.