Failure to deliver shares. Who polices NASDAQ and SEC?

[BlueCat]

Sept 29, 2014 11:36:49 GMT -5 esstan2001 said:

IMO this articles claims to present a balanced review are weak.
How can they possibly view naked SS as unlikely to have detrimental effects on capital markets, and as a vehicle to provide socially valuable pricing signals...

NAKED short selling is transacting NOTHING mixed in together with market of real securities. It has to create distortions well beyond that of compliant shorting based on borrowed or located shares.
Here is my solution to provide balance- 
NAKED LONG BUYING (oh, I can hear the comments now...)

While we are at it, lets do it with Money that we can not borrow, and does not exist either (I think the Gov't can supply us some of that)

:-)

So I'd put up a note about this earlier - this reverse is margin accounts.  And the individual is accountable to the bank that comes and takes your house if you don't pay them immediately.  There is no 'other borrowing source' unless you take a personal loan.


Now - if one could set up a way to launder and rotate margin funds, that ultimately transmits the liability back to the brokerage making the call in a way that results in interest to the margin trader (pay me interest on the money I temporarily owe you that you claim on the books but never receive) - now we'd really have something.

And no doubt, it would be prosecuted -  IMMEDIATELY.

[BlueCat]

We could call it something like a 'margin cartwheel' ...

[esstan2001]

I think Bernie Madoff would 'like' your post  :-)

[kc]

If you read this CATO INSTITUTE spring 2008 article the case for regulators getting involved with MannKind on the Fail to deliver shares is really needed.   Look at the attached JPG from their report in 2008 and then plug into it the MannKind numbers on the outstanding shares with the over 40,722,610 Failed to deliver shares in since Jan 2, 2014 - August 29, 2014. 

Its pretty scary how the stock is being minipulated.  One can only guess that since this board and on other board we have been agitating the issue that the daily share volume has dropped as the Naked Shorts know that we are pushing the issue very loud and clear.  

Cato link to their 2008 report  object.cato.org/sites/cato.org/files/serials/files/regulation/2008/2/v31n1-7.pdf

[liane]

TheStreet's request for retraction of the Washington Post article (I'll print it out here so you don't actually have to click on their site):

www.thestreet.com/story/12896216/1/thestreet-seeks-retraction-from-washington-post-on-steven-pearlstein-column.html

To the editor,
In Northwest Biotherapeutics Stock Woes Highlight the Harm of Short Sales, Steven Pearlstein insinuates that one of TheStreet's veteran reporters is conspiring with "Wall Street wise guys to use sleazy tactics to manipulate share prices for short-term profit." Mr. Pearlstein thus plainly and falsely implies that our reporter is guilty of securities fraud. Yet he intentionally fails to mention any of the information we provided him or otherwise available to him before the story was published that would have caused a reasonable reader to doubt his damning article. You should immediately retract this defamatory story.

Five days before the story ran, Mr. Pearlstein contacted TheStreet to provide a "heads up" that he was writing about our reporter Adam Feuerstein's purportedly "very hostile" campaign against Northwest Biotherapeutics ( (NWBO_) ), a biotech company that Mr. Feuerstein has long covered for TheStreet. Mr. Pearlstein -- who said he knew nothing about biotech or medicine and that he already had spoken extensively to NWBO -- asked whether Mr. Feuerstein was "working with the shorts" to drive down NWBO's stock price, whether it was true (as NWBO's executives had told him) that Mr. Feuerstein had not contacted NWBO for comment in the last seven years, and noted that an advocacy group, which he did not identify, had written a letter to the SEC that criticized Mr. Feuerstein's coverage of NWBO.

We responded to Mr. Pearlstein in writing and orally. (Mr. Pearlstein's assertion that Mr. Feuerstein "declined to speak" to him is false; Mr. Pearlstein first contacted our PR department, and I then communicated with him as editor-in-chief.) I informed Mr. Pearlstein that Mr. Feuerstein was not "working with the shorts" and that Mr. Feuerstein fully complies with TheStreet's policy prohibiting any staff reporter from owning any financial stake (long or short) in any public company (other than TheStreet). I told him clearly we had no questions about Adam's integrity nor was he part of the alleged "conspiracy" that Mr. Pearlstein repeatedly referred to. Yet, the story falsely states that I offered only the vague reply that Mr. Feuerstein was "in touch with a wide range of investors."

Second, in response to Mr. Pearlstein's statement that NWBO claimed that Mr. Feuerstein had not contacted NWBO in seven years, I asked Mr. Feuerstein who promptly showed me his email correspondence with NWBO and its PR firm as recently as February; after I emailed Mr. Pearlstein the facts, he admitted that NWBO had given him false information. But your readers wouldn't know that because his pro-NWBO story does not mention it. Third, the advocacy group that Mr. Pearlstein mentioned to us, and which he highlights in the story -- CREW -- expressly acknowledged in its letter that it has no evidence that Mr. Feuerstein has any financial interest in how NWBO's stock performs. But Mr. Pearlstein also chose to conceal that fact from readers: he never mentions it, despite citing CREW's letter four times (without linking to it). And fourth, I alerted Mr. Pearlstein that published reports alleged that NWBO has paid journalists to provide favorable "news" coverage. If your reporter had looked, he surely would have found this Web site -- moxreports.com/tag/northwest-biotherapeutics/ -- with its detailed set of allegations that NWBO pays for favorable media coverage (an allegation that also has been sent to the SEC).

Even though we had shown Mr. Pearlstein that NWBO had given him false information about Mr. Feuerstein, and even though we had urged him to investigate claims that NWBO paid consultants to create favorable media coverage, he dismissed our suggestion that he engage in greater diligence, breezily seeming to assume that the fact that NWBO's CEO is married to a prominent local entrepreneur and that NWBO was on his "radar screen" sufficed to support his conclusion, expressed by email to me, that he "check(s) things out a lot more carefully and with a more open mind than your man." Yet Mr. Pearlstein either did not conduct due diligence or intentionally concealed negative information about NWBO from your readers in order to bolster his defamatory accusation that Mr. Feuerstein is corrupt.

This attack on TheStreet's and Mr. Feuerstein's journalistic integrity is baseless. As anyone who has done even superficial research knows, NWBO is a small biotech firm with no revenue, no approved drugs, and whose SEC filings warn that its auditors recently issued a "going concern" audit opinion. It has many critics. Mr. Feuerstein, who has been writing about biotech since 2001, has every right to criticize NWBO, and doing so provides no basis for Mr. Pearlstein's insinuation that Mr. Feuerstein is conspiring with allegedly nefarious short-sellers.
Yet Mr. Pearlstein plainly implies to the Post's wide, influential audience that Mr. Feuerstein is not just biased, but a criminal. This defamatory attack is premised on what Mr. Pearlstein's article reports as undisputed fact: that NWBO stock is shorted to an "unusual" extent. But Mr. Pearlstein either ignored or concealed the fact that, according to Nasdaq (the exchange in which NWBO shares trade) and data compiled by Bloomberg, there were 7,984,135 shares short in NWBO on Sept. 15, 2014 (the most recent figures available), which amounts to 17.71% of NWBO's outstanding shares, making NWBO merely the 46th-most-shorted stock among biotech companies traded on Nasdaq, according to data compiled by Bloomberg. NWBO's level of short interest is not particularly "unusual."

Moving on, Mr. Pearlstein then accuses Mr. Feuerstein of timing an article to aid short sellers. The facts -- concealed from your readers -- show the accusation is false. In late February 2014, a German regulatory agency decided to allow an NWBO drug to be used in limited circumstances even though the drug has not been approved as safe and effective. On March 10, 2014, NWBO issued a press release about this approval. On March 11, 2014, NWBO's stock price increased. Mr. Pearlstein alleges that, in order to harm NWBO's stock price, Mr. Feuerstein "was quick to weigh in with a story that the company had withheld the news for two weeks" and was releasing it at that time to "divert attention from the fact that" NWBO had not delivered an "interim report on the results of its [US] Phase III trial."

But Mr. Feuerstein's March 11th article correctly notes that NWBO did wait two weeks to announce news of the German regulatory approval; and he cited accurate facts to support the story's thesis that NWBO chose to release news regarding the German approval to distract attention from its failure to release an interim analysis of a critical U.S. clinical trial. The facts in Mr. Feuerstein's article are true, while those in Mr. Pearlstein's are false. NWBO told investors on Dec. 13, 2013 that it expected to release an "interim analysis" of the study in "six to eight weeks" (http://www.nwbio.com/first-interim-analysis-of-nw-bios-phase-iii-gbm-trial-triggered-by-reaching-required-number-of-events/), and, more than eight weeks later, on March 7, 2014, it issued a press release describing interim findings regarding safety data but noting that review of the efficacy data was not yet complete but "still pending" (http://finance.yahoo.com/news/nw-bio-receives-recommendation-continue-130000641.html). Mr. Feuerstein never wrote about an "interim study," but an "interim analysis" promised by NWBO. The facts stated in Mr. Feuerstein's article were and are true.

Worse is Mr. Pearlstein's assertion that Mr. Feuerstein falsely overstated the significance of NWBO's description of a regulatory risk that could result in disapproval of its only drug. Mr. Pearlstein accuses Mr. Feuerstein of using a misleading headline -- "Northwest Bio acknowledged that the FDA might throw out results of its Phase III study" -- to portray as "ominous" what was "really" just the innocuous fact that NWBO "in its annual report filed with the SEC, included that possibility in the long list of risks that investors should take into consideration, just as any company in the midst of a Phase II trial would have to do." Mr. Pearlstein must have known this was false when he wrote it.

Mr. Feuerstein's April 3, 2014 article that Mr. Pearlstein attacks discusses a change that NWBO made from its prior annual report: an additional, specific disclosure of the risk that regulators might not accept progression-free survival as a valid approval criterion, and indeed that regulators in the past had not accepted that endpoint as the basis for approval (http://www.thestreet.com/story/12613007/1/northwest-bio-warns-fda-may-throw-out-phase-iii-brain-cancer-study.html). Any investor would view NWBO's revised risk disclosure as material. But Mr. Pearlstein -- an experienced business journalist who plainly knows better -- treats it as mere boilerplate, which is how he characterized it to me by email before he wrote the story. (That email mistakenly referred to this NWBO filing as a "quarterly" report, but by the time Mr. Pearlstein's story was published he correctly identified it as an annual filing, which means he read it. If he did not compare it to the prior year's report, as Mr. Feuerstein's article expressly did, he was either recklessly or intentionally indifferent to the truth.)

I could go on. But I hope the point is clear: this story is a hatchet job, unworthy of the Pulitzer-prize-winning Mr. Pearlstein, and unworthy of this venerable newspaper. We demand a retraction.

Janet Guyon

Editor-in-Chief
TheStreet.com

[BlueCat]

Anyone's take?

The Street and the Post are at it.

My first and immediate is that there are more ways to benefit than directly owning or shorting stock. And I don't think AF would be that stupid and direct about it if he were/is.

The Street has to push back on this. If they do not, it suggests they are employing and posting content from someone breaking the law - or involved? If they took action, it would be confirmation.

And this simply makes more news, which is the business they are in. Moreover, it makes noise. Its a long complicated note, and most people won't want to actually dive in and read it. They'll walk away.

So- your take?

[jpg]

Sept 30, 2014 10:42:50 GMT -5 kc said:

If you read this CATO INSTITUTE spring 2008 article the case for regulators getting involved with MannKind on the Fail to deliver shares is really needed.   Look at the attached JPG from their report in 2008 and then plug into it the MannKind numbers on the outstanding shares with the over 40,722,610 Failed to deliver shares in since Jan 2, 2014 - August 29, 2014. 

Its pretty scary how the stock is being minipulated.  One can only guess that since this board and on other board we have been agitating the issue that the daily share volume has dropped as the Naked Shorts know that we are pushing the issue very loud and clear.  

Cato link to their 2008 report  object.cato.org/sites/cato.org/files/serials/files/regulation/2008/2/v31n1-7.pdf

Many of us understand the manipulation going on and intuitively know The Street is part of it but don't have expertise to point to the naked shorting smoking gun. If anyone has the technical knowledge to present the naked shorting information to the Washington Post and Crew it certainly would be a good time to do so.
Mannkind seems like another (if not much better) example of stock manipulation the Northwest Bio.

JPG

[jpg]

Sept 30, 2014 14:32:05 GMT -5 BlueCat said:

Anyone's take?

The Street and the Post are at it.

My first and immediate is that there are more ways to benefit than directly owning or shorting stock. And I don't think AF would be that stupid and direct about it if he were/is.

The Street has to push back on this. If they do not, it suggests they are employing and posting content from someone breaking the law - or involved? If they took action, it would be confirmation.

And this simply makes more news, which is the business they are in. Moreover, it makes noise. Its a long complicated note, and most people won't want to actually dive in and read it. They'll walk away.

So- your take?

I certainly agree they had no choice then to push back. What will be interesting is if The Washington Post calls their bluff and doesn't back down. Will The Street sue for libel? Now that would be so cool... I doubt The Street will sue though. To me they are a fly by night but polished up scam. They have no interest in this kind of attention.

If The Washington Post is well prepared they would follow up with another company and issue like Mannkind and naked short selling. As I suggested above maybe one of our more market savvy participants could spell this out to The Post reporter/ Crew. I would presume Mr. Pearlstein has some good market savvy advisors on this. Hopefully Pearlstien will want to build on thus and go after market manipulators to make a name for himself.


JPG

[kc]

I agree with you.  This is the business of the MM and Hedges.  They do this on every stock except the real dogs.  They know how to gryrate the shares up and down.  They work for movement in any directons. 

My guess is that many of them meet over drinks on the weekends in the Hamptons and create their plan. 

  Maybe there is some Anti-trust or RICO activities going on when they are making their plan or maybe not!

We really don't know other than we know that something is happening. We know that there are laws and regulations that might be ALLEDGEDLY being broken or perhaps not.

There must be a Code of Wink Wink, Nod Nod that we don't know about or we would not be in this predicament of guessing what is creating the perfect storm on share price.

The game is rigged against anybody who is looking to flip a stock like MannKind. If you’re in it for the long haul then I hope we all win big.

Is AF or Jim Cramer the reason behind the decline? Who knows or cares. But what we do know is that there are 74,000,000 shorts on MannKind and since January 2, 2014 there have been about 155 Fail to Deliver lots (40,722,610 shares thru 8/29/2014) that the SEC has reported on their web site. Who is the gatekeeper to determine if these FTD shares were involving the same brokers or if the shares were being traded back and forth between the same brokers? We all assume that somebody has made good on the shares or it would be an even bigger issue.

Sept 30, 2014 14:32:05 GMT -5 BlueCat said:

Anyone's take?

The Street and the Post are at it.

My first and immediate is that there are more ways to benefit than directly owning or shorting stock. And I don't think AF would be that stupid and direct about it if he were/is.

The Street has to push back on this. If they do not, it suggests they are employing and posting content from someone breaking the law - or involved? If they took action, it would be confirmation.

And this simply makes more news, which is the business they are in. Moreover, it makes noise. Its a long complicated note, and most people won't want to actually dive in and read it. They'll walk away.

So- your take?

[liane]

Don't know why the cross out lines are appearing in my original c/p of the post. Maybe it's to prevent me from copying it. Tried to fix it, but no go...

[mnkdorbust]

Sept 30, 2014 15:14:35 GMT -5 liane said:

Don't know why the cross out lines are appearing in my original c/p of the post. Maybe it's to prevent me from copying it. Tried to fix it, but no go...

Random though but did you try to paste it into notepad then copy from notepad and past to board to potentially take out any of the unnecessary formatting?

[liane]

Sept 30, 2014 15:30:08 GMT -5 mnkdorbust said:

Sept 30, 2014 15:14:35 GMT -5 liane said:

Don't know why the cross out lines are appearing in my original c/p of the post. Maybe it's to prevent me from copying it. Tried to fix it, but no go...

Random though but did you try to paste it into notepad then copy from notepad and past to board to potentially take out any of the unnecessary formatting?

Thanks for the idea; I c/p it to Word, but it still was wiggy. So next, I postulated that there was some special character imbedded where the cross out starts. So I deleted a few characters and retyped the text. That seemed to work.

[liane]

Interesting read on NSS (thanks kc for posting it on ST):

shareholdersunite.com/the-ioc-files-useful-background-material/short-sellers-and-naked-shorting/

[jpg]

Oct 1, 2014 4:48:15 GMT -5 liane said:

Interesting read on NSS (thanks kc for posting it on ST):

shareholdersunite.com/the-ioc-files-useful-background-material/short-sellers-and-naked-shorting/

Basically the shorts got nervous the company would be sold and some rushed for the exit. When it became clear the company wouldn't be sold the shorts piled back in till the next up swing.

Unless they break every law (which at a certain point they can't even if it seems as if they can) time is on our side. The retail options traders and margin holders are less lucky and are easy picking. This hurts us all. Had all those retail options not been given to the broker dealers but used to buy shares all MNKD shareholders would have been much better off. Margin investing is toxic to the investor. From my experience when time is part of the price equation only Wall Street generally wins. Our advantage is to be time insensitive.


JPG

[vissertrades]

Below SEC PR details some of the mechanics of NSS manipulation in MNKD...

www.sec.gov/News/PressRelease/Detail/PressRelease/1365171488374#.VCwvlfldVjR

SEC Charges optionsXpress and Five Individuals Involved in Abusive Naked Short Selling Scheme
FOR IMMEDIATE RELEASE
2012-66
Washington, D.C., April 16, 2012 — The Securities and Exchange Commission today charged an online brokerage and clearing agency specializing in options and futures as well as four officials at the firm and a customer involved in an abusive naked short selling scheme.
The SEC’s Division of Enforcement alleges that Chicago-based optionsXpress failed to satisfy its close-out obligations under Regulation SHO by repeatedly engaging in a series of sham “reset” transactions designed to give the illusion that the firm had purchased securities of like kind and quantity. The firm and customer Jonathan I. Feldman engaged in these sham reset transactions in a number of securities, resulting in continuous failures to deliver. Regulation SHO requires the delivery of equity securities to a registered clearing agency when delivery is due, generally three days after the trade date (T 3). If no delivery is made by that time, the firm must purchase or borrow the securities to close out the failure-to-deliver position by no later than the beginning of regular trading hours on the next day (T 4).

The former chief financial officer at optionsXpress – Thomas E. Stern of Chicago – was named in the SEC’s administrative proceeding along with optionsXpress and Feldman. Three other optionsXpress officials – head of trading and customer service Peter J. Bottini and compliance officers Phillip J. Hoeh and Kevin E. Strine – were named in a separate administrative proceeding and settled the charges against them for their roles in the scheme.

"Feldman and optionsXpress used sham reset transactions to avoid, sometimes for months, compliance with Reg. SHO's stock delivery requirements," said Robert Khuzami, Director of the SEC's Division of Enforcement. "In effect, they 'kited' shares of stock, thus depriving buyers of the benefit of their bargain - prompt delivery of their shares."

Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit, added, “Reg. SHO compliance continues to be a high enforcement priority. Broker-dealers, their employees, and their customers must ensure that they comply with the close-out requirements of the short sale rules and regulations.”

According to the SEC’s order, the misconduct occurred from at least October 2008 to March 2010. In September 2011, optionsXpress became a wholly-owned subsidiary of The Charles Schwab Corporation.

The SEC’s Enforcement Division alleges that the sham reset transactions impacted the market for the issuers. For example, from Jan. 1, 2010 to Jan. 31, 2010, optionsXpress customers including Feldman accounted for an average of 47.9 percent of the daily trading volume in one of the securities. In 2009 alone, the optionsXpress customer accounts engaging in the activity purchased approximately $5.7 billion worth of securities and sold short approximately $4 billion of options. In 2009, Feldman himself purchased at least $2.9 billion of securities and sold short at least $1.7 billion of options through his account at optionsXpress.

According to the SEC’s order, by engaging in the alleged misconduct, optionsXpress violated Rules 204 and 204T of Regulation SHO; Feldman willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-21 thereunder; optionsXpress and Stern caused and willfully aided and abetted Feldman’s violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-21 thereunder; and Stern caused and willfully aided and abetted optionsXpress’s violations of Rules 204 and 204T.

In the separate settled administrative proceeding, Bottini, Hoeh, and Strine consented to a cease-and-desist order finding that they caused optionsXpress’s violations of Rules 204 and 204T of Regulation SHO and ordering them to cease-and-desist from committing or causing violations of Rule 204. They neither admitted nor denied the SEC’s findings.

The SEC’s investigation was conducted by Deborah Tarasevich, Jill Henderson, and Paul Kim. Market Surveillance Specialist Brian Shute, Market Abuse Unit Trading Specialist Ainsley Fuhr, and Financial Economist Michael P. Barnes provided assistance with the investigation. The litigation will be led by Frederick Block.