Feeds:
Posts
Comments

Posts Tagged ‘SEC’

Here’s a wonderful idea for a financial product: raise trillions of dollars from investors, invest in a variety of risky assets, and then lie to investors about what the shares of the fund are worth. Just to make this easy, claim that each share is worth $1, even if it’s really worth less. To support this fiction, redeem shares at $1. If prices fall and investors suspect that the shares are actually worth less than $1, they will race to withdraw their funds. The first to withdraw receive $1, the last receive whatever is left, perhaps nothing.

You can be forgiven for thinking that I’ve just described Bernie Madoff’s investment fund. In fact, I’ve described the operation of money market mutual funds in the U.S. (Note that these are mutual funds, not insured “money market accounts” offered by banks.) (more…)

Read Full Post »

“In an abusive naked short transaction, the seller doesn’t actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions.”

–  “What the SEC Really Did on Short Selling”, by Christopher Cox (SEC Chairman), Wall Street Journal, July 24 2008, P. A15. (more…)

Read Full Post »

%d bloggers like this: