bhessel (93.03)

Dear Senator Hagan,

October 23, 2009 – Comments (1) | RELATED TICKERS: DNDN , OSTK , C

Check out this post on Deep Capture detailing Senator Ted Kaufman’s efforts to recruit cosponsors for his efforts to require the SEC to reinstate the uptick rule and enforce other regulations against abusive short selling. Below is my letter to our North Carolina senators, Kay Hagan and Richard Burr (and please consider sending letters of your own; Deep Capture has a convenient link to all 100 senators’ e-mail interfaces): 

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Please consider becoming a cosponsor of SB 605: A bill to require the Securities and Exchange Commission to reinstate the uptick rule and effectively regulate abusive short selling activities. 

Naked short selling is the generally illegal practice of counterfeiting and selling short shares of stock that the seller has not borrowed (as he or she is supposed to). This pernicious practice by aggressive traders has effectively frozen hundreds of U.S. companies out of the capital markets, making it impossible for them to borrow the money they need to grow—or, in some cases, even survive. It also contributed to the meltdown of Lehman, Bear Stearns, Citibank, Fannie and Freddie, and others last year. And of course it cheats investors who play by the rules and take long positions. 

Here is a good summary of how abusive naked short selling works. 

The SEC has the authority to enforce regulations limiting naked short selling but has turned a blind eye to the practice for years. I don’t know if this is because regulators are in thrall to the malefactors as some have claimed, or if they are merely incompetent. I do know that if we cannot count on our capital markets to operate fairly, then not only do we lose a significant competitive advantage, but faith in our entire system is undermined. 

Senator Kaufman and three other of your colleagues is now seeking cosponsors for SB 605, and has sent you a letter soliciting you to join them. I hope to see your name added to that list.
Thank you for your attention to this matter. 

Brad Hessel, Raleigh