Initiative Files 27,500 Signatures to Protect South Dakota Stockholders, Emerging Businesses

Sets Penalties in SD Law against 'Naked Short Selling'

Nov 30, 2007, 00:00 ET from Representative Hal Wick

    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.
     Continued Wick,
     "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
 state law."
     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