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Letter to the editor: On naked shorting


I would like to commend you on the articles you published in the April 2005 issue of Euromoney with respect to "naked" short selling in the US securities markets. Readers may be reminded that a "naked" short sale is in effect the sale of a security that the seller does not own and has not borrowed. "Naked" short selling is in every instance a violation of several federal laws in the US – for example, laws against counterfeiting of corporate securities (a crime) and against sales of unregistered securities (a civil violation), although the securities industry's self-regulatory organizations with the blessing of the SEC have written for themselves "regulations" that permit the industry to indulge in the practice under certain circumstances. In your article "SEC seeks to curb naked ambition" [Euromoney, April 2005], James Brigagliano of the SEC in effect admits that the SEC determined that preventing upside price volatility – and thus the resultant financial losses by the manipulators and their industry partners – was of greater concern to the SEC than righting the wrongs done to investors by those same manipulators. This grandfathering of admittedly known, pervasive market manipulation and securities fraud is appalling, to say the least.

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