16 Ongoing Porn Investigations of SEC Employees

NyPo reports:

Fresh details are surfacing about the extent of the Securities and Exchange Commission's problem with porn-obsessed workers. No fewer than 16 investigations are currently underway into SEC employees who've spent up to 1½ hours a day viewing online smut and kiddie porn.

One of those investigations involves the FBI, which was called in after the computer of one senior SEC employee was found to contain flash videos of what appeared to be child pornography. It was unclear if any arrests were made.... At least 8,273 clicks on the SEC's powerful computers were tracked to dozens of salacious sites covering a spectrum of sexual appetites...

I am not kidding when I say the only securities investigations the SEC generally focused on were when a hot babe was involved.

Former Director of the New York Branch of the SEC Invested With Madoff

In a remarkable single spaced 162 page document, filed with the U.S. Bankruptcy Court in Manhattan, Bernie Madoff's victims are listed---thousands of them, including many doctors and CPA's, and the baseball great, Sandy Koufax, part of a famed medical clinic, the Mayo Foundation, the consulting firm, McKinsey & Company, and Ira Sorkin, who formerly headed the New York branch of the SEC from 1984 to 1986 (Madoff's scam likely started in the 1970's, but was certainly in full operation during Sorkin's watch). Sorkin is currently Madoff's lawyer. Sorkin also appeared to supervise the account of Rosalie Sorkin, his late mother, who also had funds with Madoff. (Madoff sent his reports on Rosalie's "investments" to Ira's office.)

Now, explain to me again how expanding the SEC under the clueless Mary Schapiro is going to help fight fraud, when the semi-sophisticated Sorkin fell for Madoff rap, hook, line and wallet.

Madoff's rip off of Sorkin's money is an object lesson in the how bad guys get in to the heads of regulators.

As for Schapiro, word is out that it is the SEC lifers that are getting into her head. They have smooth talked her into everything but running the office from Honolulu beaches. But rest assured, somewhere in the dark, the bad guys are circling Schapiro. She'll never see them coming.

All in the Family: Madoff's Future Son-in-Law Was Part of Earlier SEC Investigation Team

Bernie Madoff's daughter, Shana, is married to a former SEC compliance examiner named Eric Swanson.

Swanson was at the SEC in 2003 when the agency was examining the Madoff firm. He was also part of the SEC team that was conducting the actual inquiry into the firm.

Shana Madoff married Swanson in 2007.

According to CNBC, they say they had no "social relationship," meaning they were neither dating nor married when the inquiry was being conducted.

The SEC at Work, and Not at Work

The Securities and Exchange Commission announced on Friday settlements of an enforcement action against eight former employees of Fidelity Investments' equity trading desk, for improperly receiving travel, entertainment, and gifts paid for by outside brokers courting business from Fidelity.

"By accepting improper gifts from brokers, these individuals squandered the most important commodity in the financial services industry — investor trust," said George Curtis, the SEC's Deputy Director of Enforcement.

Meanwhile, Bernard Madoff’s investment advisory business, alleged to be a Ponzi scheme that cost investors $50 billion, was never inspected by the SEC after he registered in September 2006, Bloomberg is reporting.

Generally, the SEC scrutinizes a newly registered firm's books in the first year and then checks them at least every five years.

Bloomberg goes on:

Since 2000, he has given at least $100,000 to the Democratic Senatorial Campaign Committee and more than $23,000 to the party’s candidates, including Senator Charles Schumer of New York and Senator Frank Lautenberg of New Jersey, who leads a charitable foundation that invested with Madoff.

What for?

“You can see where people would pull the shades down over their eyes in terms of recognizing what could be one of the great frauds of our time,” former SEC Chairman Arthur Levitt said in a Bloomberg Television interview.

Of course, Madoff sat on a committee formed in 2000 by Levitt to advise the agency on new stock-market rules in response to the growth of electronic trading.

Anyone trying to get close to the SEC is doing it for a reason. There are hundreds of SEC rules suggested by real smart guys on Wall Street who do it because it will make them millions. The SEC implements these rules without really having a clue as to who benefits and why. In some, cases there are probably less than a half dozen guys that understand a regulation, but those guys are minting money, courtesy of the SEC.

As for Levitt, since leaving the SEC, he has become senior adviser to the Carlyle Group and a board member of Bloomberg LLC.

The poor schmucks who got busted taking free Red Sox tickets, no advisory board connections, no big time political donations, but also not running $50 billion ponzi schemes.

The SEC is a dangerous agency. It does more harm then good by its power to regulate. It can never change, since it is a government agency that will be beholden to political pressure. It needs to be shut down, today, before it completely ruins the stock market, with its absurd enforcements, while real financial crime and cronyism grows because of the very existence of the SEC.

The Signs Were Everyhere, But Where Was the SEC?

Reuters reports:

Societe Generale refrained from buying a business with exposure to Bernard Madoff's funds in 2003, reflecting widespread Wall Street suspicions well before the U.S. brought charges against the long-time industry fixture.

The French bank was considering buying parts of alternative asset management and derivatives company Zurich Capital Markets in 2003, two people familiar with the matter said. Zurich Capital's parent, Zurich Financial Services Group, was selling off units not related to its main business at the time.

Parts of the Zurich Capital Markets business were eventually sold to SocGen rival BNP Paribas . Zurich Financial spokesman Sean Kevelighan and BNP Paribas spokeswoman Kerrie McHugh declined to comment. A spokesman for SocGen did not immediately return a call seeking comment.

To SocGen, there was at least one problem with the Zurich Capital business: significant exposure to Bernard Madoff's asset management operations.

The bank could not figure out how Madoff generated such strong returns so consistently given its strategy, said one of the people familiar with SG's decision.

Also, there were close ties between Madoff's business and his family members.

And Madoff's fund management business executed its trades through his market-making operations, which could create a conflict of interests.

How Bad Did the SEC Blow the Madoff Ponzi Scheme?

As startling as a $50 billion Ponzi scheme is, more staggering has to be the SEC's failure to catch the scheme years ago.

The latest from WSJ is that Harry Markopolos, who years ago worked for a rival firm, is a money manger and a fraud investigator, wrote to the SEC in 1999 about Madoff after researching Madoff's supposed stock-options strategy and was convinced the results likely weren't real.

"Madoff Securities is the world's largest Ponzi Scheme," Markopolos, wrote in his 1999 letter to the SEC, according to WSJ.

Markopolos didn't stop there. He pursued his accusations over the past nine years, dealing with both the New York and Boston bureaus of the SEC, according to documents he sent to the SEC and reviewed by WSJ.

A series of media stories also raised questions about Madoff's operations, including a piece entitled "Madoff Tops Charts: Sceptics Ask How" in the industry publication MAR/Hedge in May, 2001, and a subsequent story in Barron's.

How could the SEC have missed this with the media covering the story and a money manager/fraud investigator trying to get them to investigate for almost 10 years? As I wrote earlier, the SEC was clearly doing something else besides looking for bad guys. They were doing what they always do, respond to political pressures, re-announcing absurd rules to fight the financial crisis and launching absurd show trials against the likes of Mark Cuban.

Red Flags the SEC Missed in the Madoff $50 Billion Ponzi Scheme

As I pointed out earlier, the SEC completely missed Bernie Madoff's $50 billion Ponzi scheme, despite the fact that money manager Harry Markopolos, who also is a financial fraud investigator and associate member of the Greater Boston Chapter of the Association of Certified Fraud Examiners, had been begging the SEC for 10 years to investigate Madoff.

But, Madoff wasn't the only private sector operator who smelled a rat. Without SEC privileges to look at books, subpoena records and the like, Aksia, LLC, a hedge fund research firm, advised clients not to invest with Madoff.

Here's Aksia CEO Jim Vos explaining some of the red flags that Aksia spotted, but apparently did not raise curiosity at the SEC:

It's Time To Abolish the SEC

This is all you need to know about the Securities and Exchange Commission. Bernard Madoff put out a shingle as an investment advisor, instead of investing the money that was placed with him, he ran a huge Ponzi scheme. How big? $50 billion in losses.

As the multi-decade scam went on, WSJ is reporting that a complete outsider, a Boston money manager with no audit power, no subpoena power, nothing, Harry Markopolos, smelled a rat. For the last 10 years, he has been writing and otherwise contacting the SEC asking them to investigate Madoff. He told the SEC that Madoff couldn't possibly be making the profits he was reporting. Let me repeat, he has been contacting the SEC for 10 years begging them to investigate Madoff. Nothing happened.

Further, CNBC's Charles Gasparino reports that some hedge fund advisers were advising clients to stay away from investing with Madoff. The signs were there.

The SEC was clueless.

How did the SEC finally break the case,and bring charges yesterday? Madoff's sons walked into the offices of the SEC and said, "Our father just told us he has been running a Ponzi scheme and that he ripped off $50 billion."

Bottom line, the SEC is a political institution, it doesn't react to a Boston money manager who might be on to something, it reacts to politics.

It will run a show trial involving Mark Cuban.

It will pose as a battler of the financial crisis.

A complaint from a Harry Markopolos? Who the hell is Harry Markopolos? Put that at the bottom of the inbox. Hey, who knows, they might have gotten to it in year 11.

The only way you would have been protected from Madoff, was not from looking at SEC filings Madoff made (Oh yeah, he filed with the SEC and just made stuff up.), but by turning to wizened traders like Markopolos, who know what kind of profits can and can't be made, and what the explanation for those "profits" could really be.

The SEC won't even bust Social Security for the Ponzi scheme that it is.

You just need to go to the internet to find out the truth about SS.

Chris Cox and the SEC are jokes. The SEC should be closed down today.

SEC Buries Negative Report, By Releasing On Friday After Thanksgiving

Just last week, I explained to a friend that I always looked forward to the day after Thanksgiving because that is the day that a company that has dirty laundry to release will try to bury it by releasing the news on the Friday after Thanksgiving, since people are traveling and with families, and readership of news drops dramatically.

I then remarked, even the government will release dirt Thanksgiving weekend. So who gets the prize for releasing dirt this year? None other than the supervisor of FULL DISCLOSURE in publicly traded corporate America, the Securities and Exchange Commission.

Mark Cuban, who has recently been charged by the SEC in a bizarre insider trading case, had his turkey feast this year on Friday instead of Thursday, since the SEC served up a major turkey for Cuban to chew on and chew on, on Friday. That's when the SEC chose to bury a critical report about the organization by its Office of Inspector General, by releasing the report on the great burial day, the day after Thanksgiving. The report makes the SEC look like a bunch of thugs.

As Cuban noted after reviewing the report:

No wonder they released it on the Friday after Thanksgiving without any press release to let people know its available…

Cuban also notes this about his coverage on his blog of the OIG report:

First let me say that this has nothing to do with me, but given my interest in all things financial and the government during this financial crisis, I read with interest the Office of Inspector General’s Report to Congress regarding the SEC

OK Mark, got ya. Nudge, wink.

Cuban then goes on:

First the humorous side of the report, the SEC apparently has issues with Porn usage among employees.

and on:

The OIG investigation has found that the reports that employees are required to file when they buy, sell or own securities are not meaningfully reviewed or sufficiently checked for conflicts of interest. Moreover, there is currently no system in place for the Commission to detect if an employee who has traded or owns a security failed to properly report such transaction.

and on:

The OIG is investigating an allegation that Commission staff engaged in a retaliatory investigation of a company after it publicly complained about naked short selling.

and on:

The OIG report makes for interesting reading with ALLEGATIONS of intimidation, perjury, falsifying data to a court to get a judgment, and lots of abusive behavior within the employee ranks. Then there is the irony of their lack of a definitive policy on the distribution of material non public information.

and on:

Referrals to Department of Justice for Prosecution 6.

That's 6 SEC employees being referred to the Department of Justice for consideration of criminal prosecution. For the 6 months between April 1 and Sep 30 of this year. Out of only 3500 employees.

The always helpful Cuban closes with the telephone numbers to the OIG that should be used to report further SEC misconduct.

The Coming Bizarre Show Trial of Mark Cuban

"It's about cheap publicity," one of Mark Cuban's lawyers, Stephen Best, said to me over the phone as I tried to grasp the bizarre insider trading charges against Cuban.

"The SEC is suffering from bad publicity because of the way the markets have crumbled around them," said Best. "Mr. Cuban is high profile and they want to move the focus away from the way they have handled the crashing stock market."

I wanted to know who at the SEC he thought might be behind this. "Do you think SEC Commissioner Chris Cox is involved in this?", I asked. "Yes," Best answered without hesitation. (Note: Cox recused himself from the vote on whether Cuban should be charged because of a bizarre series of emails between Cuban and and Fort Worth-based senior SEC trial lawyer, Jeffrey Norris, who called Cuban unpatriotic. “Either you are really an anti-American ideologue or your allegiance to making money is significantly greater than your dedication to your country,” wrote Norris. Cox was cc'd on some of the emails.)

Most people's view of justice in America is that of prosecutors and regulators going after bad guys, after carefully weighing evidence. But some prosecutors indeed have what Cuban was quoted as calling "win-at-any-cost ambitions". And their eyes can get especially big when a high profile name is involved. It's great for the resume when you move on to the private sector and there's nothing like going back home to Thanksgiving dinner when you're the guy at the family table going after the big name.

Two of the SEC lawyers involved in the Cuban case seem to be win at any cost, bragging rights around the Turkey Day dining table, types. Best pointed out to me that one SEC attorney on Cuban's butt is Robert Kaplan. Kaplan was recently under Congressional investigation for possible misconduct. Another SEC attorney involved with the case, Scott Friestad, recently lost a case in North Carolina and the judge found it appropriate to rebuke Friestad's tactics during the trial.

Best promises their will be bombshells coming out about the SEC's conduct in the Cuban case. He points out that the SEC has done a number of things from minor to major that do not follow general SEC policy. On the minor end, the SEC generally calls a client's lawyers when a client is about to be charged by the SEC. The SEC did not extend this standard courtesy to Cuban's lawyers. No calls were made to them by the SEC before the charges were made public.

On a more serious note, the SEC in addition to investigating Cuban was investigating Mamma.com. Mamma.com is the company in which Cuban sold stock that prompted the SEC charges. Best points out a very crucial timeline that is critical to the charges against Cuban. There is no insider trading charges against Cuban unless the president of Mamma.com testifies that he told Cuban he was about to get inside information and that Cuban agreed not to sell any stock.

So Mamma.com is under investigation and the SEC closes the case against Mamma.com just days before the then CEO of Mamma.com, Guy Faure, is to be questioned by the SEC about what was or was not said to and by Cuban. Best certainly is implying this timeline suggests that someone got to the SEC and let them know Faure would deliver Cuban on a platter, if Mamma.com was taken off the platter.

Now to the charge itself.

There are many sound economists who believe that there is nothing at all wrong with insider trading, see here and here. But the charges against Cuban are truly taking the concept of insider trading to a new bizarre outlier that could literally give CEO's the power to halt the selling of any major stockholder at anytime. With CEO's pulling down multi-million dollar salaries that are coming under attack,it shows just how desperate the SEC is to win some kind of case, somewhere against some "name" that they will literally create a tool under which CEO's will be able to freeze shareholders from selling stock whenever they want.

Here's what I mean. The charge against Cuban is that he received a call from Faure when Faure was president of Mamma.com and that Faure said to Cuban that he was about to give him some inside information. The inside information being that Mamma.com was about to sell more stock to raise more money.

Now there is nothing in writing about this, just a "he said , she said" between Cuban and Faure. If Faure really wanted to convey inside information to Cuban, he could have very easily have documented the disclosure by having Cuban sign a standard non-disclosure document. Faure did not do this.

In truth, the way it likely went down is that Faure was desperate for cash and decided to contact big bucks Cuban to see if he would invest more money. Upon hearing Faure's plan, Cuban must have thought this guy is a f#*king idiot and sold his stock. If it went down this way, there is no insider trading case.

There is only a case if the desperate Faure would have spent time, before asking Cuban for money, spouting off legalese about insider trading. How likely is that?

This is where the timeline Best emphasises comes into play. Who knows what the SEC found out about Mamma.com and Faure when they conducted their investigation of Mamma.com or who knows what Faure feared they might discover? So at this point you have an SEC looking for some good publicity and a possibly desperate Faure. If they charge Faure with anything, who is going to pay attention? But if Faure plays ball and suddenly "remembers" he turned into a legal gusher warning Cuban of all sorts of things during their phone call and that he then "remembers" that Cuban acknowledged Faure's gusher of legalese, then the SEC has Cuban as its target and you get regular national news coverage and as a bonus you get coverage on ESPN.

That's the case and it is hard to see how the facts in this case go anywhere near "beyond a reasonable doubt". It will be a major surprise if the SEC wins this case. But let's say they do somehow win. What they will have done is create a tool for fat cat CEO's to stop major shareholders from selling their stock. It will become known as a "Cuban situation."

Suppose a CEO fears a major shareholder may be selling stock or fears he might start selling stock, if the SEC wins its case against Cuban, then all the CEO has to do is call the shareholder up and tell him he is thinking of selling more stock in the company. This will freeze that shareholder from selling stock, as his stockbroker and his lawyer will remind him of what happened to Cuban, who received such information by phone.

The SEC, of late, has been marked by very little in the way of deep thinking. The latest charge against Cuban is more along this line. If the SEC succeeds in this case, it will do nothing but create another tool for fat cat CEOs to use against common shareholders.

UPDATE: Steve Best, one of Cuban's lawyer, writes: "The legal standard of proof in a civil case is beyond a preponderance of the evidence-- you cited the criminal standard."

SEC Bites A Big Dog

Does SEC Chairman Chris Cox have another public relations nightmare on his hands?

The billionaire owner of the Dallas Mavericks, Mark Cuban, has been charged with insider trading by the SEC. Note to SEC, Mark Cuban is not Martha Stewart.

The SEC may have thought they had another lay up on their hands, instead they appear to be going up against someone that is not afraid to rip at the core of the SEC and its enforcement actions. He is a fighter and has the billions to back up his fight.

The tough Mark "I go for the throat when you mess with me" Cuban is already in prime form. There are some very interesting allegations already developing out of a case that has been public news for less than 24 hours. But the allegations are not from the SEC, they are from Mark Cuban and his lawyers.

On his web site Cuban states (my emphasis), “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

Cuban's lawyer, Ralph C. Ferrara of Dewey & LeBoeuf LLP, stated (My emphasis), "This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division."

Another Cuban lawyer, Christopher Clark, told FOX news that the SEC's text of a phone call is completely wrong. "If there is a tape of them everybody can play it and it's not going to say anything like what the SEC quoted." This sounds to me like Clark is charging the SEC with lying.

Clark went on to make an even bigger charge:

People who criticize the SEC have a much higher chance of having an enforcement action brought against them and we're going to demonstrate that. Very persuasively. In the right forum.

Cuban runs a site called BailoutSleuth.com which tracks what happens with bailout money and monitors any questionable behavior by those who are receiving and handing it out.

This case has the potential to rip the SEC to smithereens. Get your popcorn ready.

McCain Would Fire SEC Chair Cox

Republican presidential candidate John McCain, campaigning in Iowa Thursday, is expected to call for the firing of Securities and Exchange Commission (SEC) Chairman Chris Cox.

In his prepared remarks, Sen. McCain (Ariz.), without naming Cox, said the chairman has “betrayed the public’s trust.”

“If I were president today, I would fire him,” McCain will say, according to his prepared remarks.

This is swatting a gnat while a tiger and lion are headed towards you. McCain doesn't have a clue.

This crisis is a Paulson and his lapdog, Bernanke, operation.

Except for his nonsense about short-sellers, Cox has been incompetently benign during this entire crisis. Incompetently benign in a bureaucrat is not a bad thing.

-Robert Wenzel

SEC Adding Lipstick To The Financial Crisis Pig

In an attempt to put lipstick on the financial criss pig, the Securities and Exchange Commission met last night in emergency session to consider requiring hedge funds to disclose their short positions and institutional traders to secure their records in anticipation of subpoenas.

Under the proposals, managers with more than $100 million invested in securities would have to issue reports of their daily short positions.

The meeting came after the SEC adopted two regulations that go into effect today that will force traders and brokers to actually borrow shares used in all short sales.

The proposal to disclose short sale positions of hedge funds on a daily basis will do nothing but provide a nice handy spot to find out what new dogs pro short sellers have discovered and put more downward pressure on those stocks.

-Robert Wenzel

Paulson Statement on Lehman Brothers

September 14, 2008
hp-1134

Paulson Statement on SEC and Federal Reserve Actions
Surrounding Lehman Brothers

Treasury Secretary Henry M. Paulson, Jr. made the following statement today:

I strongly support the actions announced tonight by SEC Chairman Chris Cox, Federal Reserve Chairman Ben Bernanke and market participants. These changes will strengthen and enhance our financial markets.

These initiatives will be critical to facilitating liquid, smooth functioning markets, and addressing potential concerns in the credit markets.

I particularly appreciate the efforts of market participants who came together this weekend and initiated a set of steps to facilitate orderliness and stability in our financial markets as we work through this extraordinary environment.

Today we are looking forward. This weekend's discussions made clear that both market participants and regulators in this country and abroad recognize the need to support market stability and remove uncertainty as they address current challenges.

I am committed to working with regulators and policymakers – including Congress – to take necessary and appropriate steps to maintain the stability and orderliness of our financial markets. And I will engage with regulators and policymakers around the world to that end.

Healthy capital markets are the backbone of a vibrant U.S. economy and critical to the well-being of our economy and American families. I am confident in the resilience of our capital markets, and in the commitment of U.S. regulators and market participants to work together through this difficult period.

-EPJ Original Documents

The Duffle Bag March

Paul Krugman highlights this from a Reuters report:

OK, this is weird:

At Lehman’s headquarters in midtown Manhattan, employees were coming and going throughout the day.

Some entered with what looked like empty duffel bags and gym bags and emerged an hour or so later with full bags

.
During the weekend of the Bear Stearns collapse, I was outside Bear Stearns headquarters and the same thing occurred there. It's brokers and traders fearing that they will be locked out of their offices, so they grab their client books and list of trading positions, so that when they move on to a new firm they have contact and portfolio information immediately at hand.

I'm not sure this isn't breaking some kind of NASDAQ or SEC regulation, but it is being done in full view of the regulators, especially in the Bear case, since SEC officials were part of the group meeting with Bears Stearns in the same offices!!

There are some individual brokers that have a long standing habit of putting erroneous phone numbers (or at least the worst number to reach a client at) on computer data, so that if they ever leave, it will be difficult for the old broker's firm to easily contact the client, while the broker sets operations at a new firm and transfers the client account over. It's the hand written contact info in the black books that are being hauled out that has the important contact info.  

-Robert Wenzel

SEC Statement On Emergency Meeting

FOR IMMEDIATE RELEASE
2008-196

Washington, D.C., Sept. 12, 2008 — The U.S. Securities and Exchange Commission tonight issued the following statement:

Senior representatives of major financial institutions are meeting at the Federal Reserve Bank of New York Friday evening to discuss recent market conditions. Also participating in the meeting are Treasury Secretary Henry M. Paulson, Jr., U.S. Securities and Exchange Commission Chairman Christopher Cox, and Federal Reserve Bank of New York President Timothy F. Geithner.

-EPJ Original Documents

Schonfeld Cashing In

After harassing Wall Street from the top enforcement post at the SEC, Mark Schonfeld is about to cash in, and start to defend Wall Street. The game goes on.

WSJ is reporting that Schonfeld will leave the SEC next month, and likely join Gibson, Dunn & Crutcher LLP.

-Robert Wenzel

EPJ Dictionary: Wells Notice

A Wells notice is a notice sent by the Securities and Exchange Commission that informs its recipient that the SEC staff is considering enforcement action, and offers the recipient a chance to respond.

The Secret Author of "How Stocks Are Manipulated" Has Died

I have protected a secret which can now be revealed. The true author of the underground Wall Street classic, "How Stocks Are Manipulated", was Oppenheimer & Co's chief investment strategist, Michael Metz.

Metz died earlier this month from cancer at the age of 79. He was a five decade veteran of Wall Street.

"How Stocks Are Manipulated" was originally published in 1980 by Macmillan Publishing under the title, "Street Fighting at Wall and Broad: An Insider's Tale of Stock Manipulation". It was republished, with its current title, in 1987 by Richardson Snyder Press. For both titles Metz used the pen name, Marchand Sage.

Many of the techniques outlined in the book would have crossed the line of Securities & Exchange Commission regulations. I suspect Metz employed many of the techniques in his own market operations. The SEC never came close to being aware of, or investigating, Metz's operations.

The SEC 'Naked' Short Selling Order Turned Out To Be A Joke

NYT's Floyd Norris publishes some interesting data from Sungard Astec about stock borrowing actiivity for short sales during the period of the SEC order for 19 stocks with regard to 'naked' short selling.

The data indicates that the strongest reaction in the markets to the SEC order came from market makers, who borrowed stock they didn't need to, because of the poor wording of the order.

Wrote Norris:

What is really interesting is that most of these shares were not hard to borrow before the announcement came. In other words, there was not much indication that these stocks were subject to abusive shorting — or a lot of shorting of any kind — before the commission acted. Had the S.E.C. put out a clear rule when it first acted, some of the additional borrowing might not have happened.

Norris concluded:

But the evidence that these stocks were not hard to borrow before the order was announced makes it seem more likely that the S.E.C. move did not have a lot to do with real worries about the then-current state of the market. Instead, it looks like an effort to do something, and to be part of a government effort to support the major financial companies and to send the signal that the government would not allow them to fail. If that was the goal, it has yet to show much success.

In short, as we sad from day one, a useless order, PR stunt.