PIERRE, S.D., Nov. 30 /PRNewswire/ -- Addressing the growing concern
over stock manipulation commonly called "Naked Short Selling," South Dakota
State Representative Hal Wick this week announced the filing of 27,500
initiative signatures to place on the November 2008 ballot a measure to
codify in state law penalties for selling stocks to investors but failing
to actually deliver the stock.
The practice is against federal law but rarely prosecuted by the
Securities & Exchange Commission (SEC). The issue has seen heightened media
attention as the list of publicly traded companies with shares that have
failed-to-deliver growing to more than 4,000.
The 27,500 voter-signatures are more than 10,000 signatures above South
Dakota's requirement for submission to the ballot.
Representative Wick said: "South Dakotans, many of whom have their
retirement savings invested in America's stock markets need to be assured
that when they purchase a share of stock, they're actually going to get
delivered a share of stock. Emerging businesses need the ability to grow
their companies through initial public offerings without fear that rogue
manipulators will naked short their company out of existence. And taxpayers
need reassurance that our state's tax funds are safely invested for public
employees' retirements. The South Dakota Shareholder Protection Initiative
puts into our state laws similar provisions that exist in federal laws,
with South Dakota civil and criminal penalties mirroring other forms of
fraud and larceny. The initiative gives three days, a commercially
reasonable timeframe, for the shares to be delivered to the purchaser.
Naked short selling involves short selling stock without first
borrowing or even locating the stock. Because the stock is not borrowed,
the stock is not delivered to the purchaser of the stock. This is called a
"failure-to-deliver" or FTD. Often, brokerage firms will simply issue
"share entitlements," -- an I.O.U. when a FTD occurs, usually without the
knowledge of the stock purchaser. FTD's create phantom shares that
circulate in the system as real shares.
"The effect of naked short selling is the same as counterfeiting
currency -- it dilutes and destroys stock value. It's just like copying a
$100 bill in the Xerox machine, or selling a car without the seller
delivering the vehicle to the buyer. We're thrilled that South Dakota
citizens will have a chance to vote these investor protections into our
According to an Emmy-nominated special report by Bloomberg Financial TV
entitled "Phantom Shares," on any given trading day, eight million shares
fail-to-deliver every hour -- more than 10 billion shares a year. The SEC
lists companies whose stock has failed-to-deliver and that list now numbers
in the thousands, with some stocks being failed-to-deliver for years.
Unfortunately, by the SEC listing the companies that have FTD's, these
companies are simply further victimized -- akin to putting crime victims
names and pictures in the paper, but keeping the criminals anonymous.
South Dakotans for Securities Reform consists of stockholders and
concerned citizens who want to help protect South Dakota companies,
stockholders and taxpayers from the harms of stock manipulation through
naked short selling and failure-to-delivers. The group is chaired by State
Representative Hal Wick and language for the initiative was drafted by
former South Dakota Attorney General Mark Meierhenry, who answered
technical legal questions at the press conference. The organization is
supported by Americans for Securities Reform, a national 501-c-4
not-for-profit that is supporting similar legislation in several states.
CONTACT: Representative Hal Wick
SOURCE Representative Hal Wick