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SEC Charges Two California Firms For Unlawful Short Selling


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The message this sends to the markets is not so good. If you cheat and get caught you cut a deal with the SEC and give the money back an d promise not to do it again. Also it interesting the stance that one of the miscreants took they shorted in their personal accounts and bought with their clients dough. They have a fiduciary responsibility with their clients when you have a fiduciary responsibility you CAN NOT take the opposite side of the trade as principal.

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Should think we'll see a lot more of these, as the underwriting dealers tip off the SEC.


Standard underwriting practice is to sell more shares than there are on offer, to create a short overhang that the underwriter commits to flattening (guaranteeing bids at the offer price) within 2 weeks of the offering date. As the client, & the buyers, pay a fee for this underwriting committment - it's in everyones interest to remove those who cant play by the rules.





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