The SEC wants to put an end to false rumors…
There’s so much going on this morning, that it’s hard to know where to focus one’s attention. There’s the rescue of Fannie and Freddie, the deal for Anheuser-Busch (BUD) and yet another Powerpoint in the ongoing Yahoo (YHOO), Microsoft (MSFT) and Carl Icahn saga.
But at times like this, it’s always good to stick to our knitting. So we’ll focus on this press release the SEC put out at noon yesterday. The takeaway was that the SEC was concerned with the intentional spreading of false rumors and appear to be aimed at broker dealers and investment advisers. Yesterday’s release also noted that both FINRA and the NYSE were joining together to deal with the false rumors.
“The examinations we are undertaking with FINRA and NYSE Regulation are aimed at ensuring that investors continue to get reliable, accurate information about public companies in the marketplace,” said SEC Chairman Christopher Cox. “They will also provide an opportunity to double-check that broker-dealers and investment advisers have appropriate training for their employees and sturdy controls in place to prevent intentionally false information from harming investors.”
Now don’t get me wrong. False rumors are bad, as I footnoted here two weeks ago. That’s true whether they impact small stocks like Microvision (MVIS) or large companies like Bear Stearns or Lehman Bros. (LEH). But, as Andrew Ross Sorkin wrote and blogged last week, stopping them seems to be easier said than done. Instead, it seems much easier to blame the short-sellers for the rumors, as Vanity Fair did here, even though it’s clearly not always the shorts who are responsible.
The other surprising thing about yesterday’s release was its timing. In all the years that I’ve been following the SEC, I’ve yet to see a Sunday press release. So clearly, they’re taking this pretty seriously. Of course, given the various ways that information moves these days — instant messages, anonymous email accounts, anonymous bloggers, unrecorded cell phones, Twitter, Facebook and lots of others — it seems like a mighty Herculean task.
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July 14th, 2008 at 11:05 am
Some hard core financial facts.
http://www.stocktiming.com/Monday-DailyMarketUpdate.htm
At the close on Friday, the Banking Index was at 54.67. The 1998 support was 54.57. In spite of Freddie Mac and Fannie Mae’s huge drops, the Banking index HELD the 1998 support.
If it closes above the 2002 resistance at 60.87, then we should see the Banking Index move up to its 65.75 resistance that was set in 2003.
This Thursday, July 17, 2008 at 5:00 PM ET, Merrill Lynch will announce its Second Quarter 2008 Earnings. The market is really nervous about this one, and investors are afraid that “another shoe may drop” when they announce. This has to be a hindrance for the Banking Index to move up bravely now after a very oversold condition.
We are at a critical point that the Government and the Fed. must continue to act decisively in order to abate continued selling by the large Institutional investors. This will be a critically important week for the Fed. with little or no margin for error.
July 14th, 2008 at 4:05 pm
It may sound stupid or foolish or damaging, and you probsbly on principal should not spread. But what kind of detrrence will they impose on the rumor repeater who says: “I didn’t know for sure it was false.” Sounds not too well thought out. We’ll see Rumor Police, What kind of society is that.
July 14th, 2008 at 8:04 pm
Have you read http://www.deepcapture.com/ ? or watched the presentation on Wall Street corruption at http://www.businessjive.com/ ? I wonder if the SEC should stop the Failure To Deliver loophole immediately - think that would help?
July 15th, 2008 at 1:20 pm
See what I mean? Problem is, they’re only restricting this practice for Fannie/Freddie:
http://tinyurl.com/6haj9l
SEC to limit naked shorting of Fannie, Freddie, brokers
SAN FRANCISCO (MarketWatch) — Christopher Cox, chairman of the Securities and Exchange Commission, said on Tuesday that the regulator will try to limit so-called naked shorting of shares in Fannie Mae. The SEC will issue an emergency order stating that all short sales of shares in these companies will be subject to a “pre-borrow” requirement, Cox explained. This will last for 30 days, he added. The SEC is also planning more rule-making focused on the broader market, Cox said. In a typical short sale, traders sell borrowed shares, hoping to buy them back at a lower price and return them to the lender. The difference is kept as profit. In naked shorting, a trader shorts a stock without first making necessary arrangements to borrow shares. That sometimes means the seller fails to deliver the stock to the buyer and the trade can’t be settled, running afoul of securities laws.
July 16th, 2008 at 3:59 pm
Michelle, I had a feeling SEC may have put out a press release in 2001 or 2002 on a Sunday, there were some fairly urgent goings-on happening back then in the pre-Sarbox period; I figured there may have been one on Enron or WorldCom (which apparently there wasn’t) but they did issue a press release on Sunday Sept. 16, 2001, following the Sept. 11 tragedy and related disruption of the markets, (after issuing a number of press releases on Sept. 11 and 14) by noting: “SEC To Monitor Securities Markets When They Open Monday.” (Full disclosure: I worked at SEC 12/99-1/04 in Office of Chief Accountant). PS After reading about your iPhone exploits last year I was wondering if you’ve bought iPhone 3G or are downloading the software upgrade