Thou Shalt Not Lie!
Traders Magazine, September, 2008 by Nina Mehta
Traders, it turns out, sometimes stretch the truth. They may, for instance, tell their executing broker they received a locate from another broker for a stock they're selling short. To address this problem, which has been on the SEC's radar for a while, the regulator in March proposed a naked short-selling anti-fraud rule aimed at manipulative pre-trade behavior.
The proposed Rule 10b-21 targets hedge funds and prop traders who deceive broker-dealers about their ability to deliver securities for settlement. Abusive naked short-selling that's part of a manipulative scheme is already illegal under the anti-fraud provisions of the federal securities laws, the SEC stressed in its proposal. But, it said, this rule "would highlight the specific liability of persons that deceive...
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