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From: StockDung4/9/2006 3:20:17 PM
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StockGate: Sifting Media Overload On Research Transgressions, Short Selling For Truths Is No Small Feat / Home
(By Gayle Essary) With independent research transgressions and naked short selling ?enjoying? 24/7 attention on CNBC and every major financial print media these days it?s sometimes hard even for us to remember when this newswire, over the past three years, was basically the sole source of news on these subjects.

It has taken the dust-up regarding questionable research that Gradient Analytics is no longer able to spin the same way twice in the same half hour, and the resulting legal and regulatory flap regarding it, the Bank of America (NYSE: BAC), Biovail (NYSE: BVF), Overstock.com (NASDAQ: OSTK), TheStreet.com (NASDAQ: TSCM), a gaggle of reporters and two giant hedge funds, SAC Capital and Rocker Partners, to bring these subjects front and center.

The resulting noise has all but obfuscated many of the underlying issues, and while much of the subsequent media, blogger and message board coverages have had some seeds of accuracy, almost all of it mixes in fact and rumor and even inaccuracies, that need to be addressed, clarified and corrected. This is our objective here, and we will try to cover as much of the waterfront as possible to accomplish that.

Even this writer appeared on CNBC this past week in his capacity as head of Investrend Research (http://www.investrendresearch.com), a sister company to Investrend Information (http://www.investrendinformation.com), publishers of FinancialWire, separate divisions of Investrend Communications, Inc. (http://www.investrend.com).

The upshot of that appearance: whether or not Gradient may have been complicit in any other misdeeds, its multiplicity of ?explanations? as to why it did not need to comply with U.S. Securities and Exchange Commission Regulation 17(b) or otherwise follow industry ethical standards in providing full transparency to its subscribers and the public regarding its ?custom,? or ?sponsored? research reports, was, and remains, as this writer stated, ?not only disingenuous, but hogwash.?

Lost in the uproar is the fact that ?sponsored? research, by legitimate and credible ethical providers following standards such as those disclosed and practiced by ethical providers such as Investrend Research and more than a dozen of its peers at firstresearchconsortium.com, and specifically which do in fact incorporate Regulation 17(b) as a cornerstone of transparency, is in fact favored by the SEC, via the positioning of its advisory committee on smaller public companies.

U.S. Securities and Exchange Commission Regulation 17(b) states:

?It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.?

The SEC advisory committee in its Final Report at sec.gov notes that thousands, in fact more than half of all smaller public companies have no analytical coverage at all, which the SEC committee says has these resulting impediments to markets liquidity:

?Companies with no independent analyst coverage have a reduced market capitalization in comparison with companies that do have such coverage, and are subject to higher financing costs when compared with their analyst-covered peers;

?A lack of coverage by independent analysts limits shareholders? and prospective shareholders? ability to obtain an informed outsider?s perspective on identifying strengths and weaknesses and areas for improvement;

?The lack of coverage lessens the entire ?mix of information? made available to investment bankers, fund managers and individual investors, which makes markets less efficient; and

?Because analyst reports trigger the buying and selling of shares, the lack of such reports frustrates the formation of a robust trading market.?

?Sponsored research? has institutional and regulatory support, but the challenge is to keep the public and the marketplace educated to be able to tell the difference, and to know precisely what to look for in terms of conflict, disclosure and transparency.

While much of the media, bloggers and message boards have subsequently seized on Gradient?s failure to provide either the full transparency required by the law of the land, or the full transparency dictated by a recognized ethical standard, such as the ?Standards For Independent Research Providers,? however, sources tell FinancialWire that the SEC staff may not bring an enforcement action against Gradient for this transgression, because it is a ?new? issue, and the SEC appears to be fixated only on potential wrong-doings associated with its original investigation.

?How many 17(b) enforcement actions do you see in general?? an SEC enforcer involved in the Gradient case reportedly asked our source, noting it is not the highest priority at the agency. The last major 17(b) enforcement action was taken a year ago against research provider Dutton Associates, for its admitted failures to provide full compensation disclosures for research issued about Easylink Services (NASDAQ: EASY) while former SEC Commission Chair William McDonough was serving on Easylink?s board of directors.

That enforcement action was agitated by revelations in Newsweek by former investigative reporter Gary Weiss, who has since left Newsweek to write a book, ?Wall Street Versus America? (http://www.gary-weiss.com), due to be published this week.

There have been a sprinkling of other enforcement actions, and despite the fact that a ?Site Search? of the term ?17(b)? at FinancialWire (http://www.financialwire.net) brings up some 386 articles about similar alleged transgressions in a two year period since May 18, 2004, and despite representations by spokespersons at the SEC that its enforcement division has been ?aggressively? looking seriously at this issue, and despite unanimous support from participants in the two most recent SEC Forums to tighten 17(b), and the most recent inclusion of 17(b) as a cornerstone of the transparency expected by the SEC in an advisory committee?s recommendation that the SEC endorse standards-based, transparent sponsored research by credible providers, the reported lack of enthusiasm to provide investors with a level playing field at the staff level represents, from this view, a serious lack of tone at the top.

The financial marketplace, as this writer demonstrated in his own testimony to the SEC last year, when he brought stacks of junkfaxes as evidence of massive distributions of reputed, and often scam ?research reports,? is inundated with research that not only provides little or no transparency, but often fails to provide a name of any analyst, much less a ?credentialed? one, suspect ?ratings? and ?target prices,? and often a raft of conflicts big enough to drive a Mack truck through.

The most prevalent conflict in the industry, as this writer has described to Charles Gasparino, the reporter covering the current ?independent research scandal,? is the practice, although not illegal, of analysts and providers owning a ?stake? in their ratings and targets through stock, warrant or options ownership.

While both the ?Standards for Independent Research Providers? and the ?Issuer / Analyst Guidelines? promulgated by the CFA Institute and National Investor Relations Institute? oppose research providers owning stock in companies under coverage, only the ?Standards? provide an outright ban on the more serious concerns regarding individual analysts owning stock in the companies they cover.

There are two types of ?independent research providers,? a term in the industry generally meant to indicate ?independence? from the tainted research provided by investment banks that was the subject of the $1.4 billion ?global research settlement? negotiated two years ago by the SEC and the New York State attorney general, Eliot Spitzer, now a candidate for governor. The media has recently been discussing ?independence? in the meaning that it is free from conflict or potential conflicts are fully disclosed.

One type is the ?sponsored? research provider, represented by ethical firms that are members of the FIRST Research Consortium, and the other type is the ?subscriber-based? research provider, represented by ethical firms that are members of InvestorSide (http://www.investorside.com).

?Sponsored research? is generally distributed directly to the general public, and when via Investrend Research Syndicate for just over a half dozen standards-based providers, to all classes of investors at the same time. ?Subscriber research? is generally privately-distributed, to institutions that are looking for investment ideas and diligence. Traditionally such subscribers have not wanted the general public to see that research, because it is part of the mix of data relied upon by the hedge fund, money and portfolio managers in their own investment decisions, in which they are seeking an edge.

Recently, however, these lines are being crossed, and it may be in some part due to the ?research settlement? which deemed that the ten or eleven investment banks involved in that settlement have had to find at least two other reports from sources other than their own research departments on each company for which a report is made available to their retail clients. Aggregators such as BNY Jaywalk have sprung up to find and provide additional research. Generally these now come from subscriber providers that previously did not make their research available to anyone other than their institutional subscribers. The subscribers have allowed this because the research is being ?cherry-picked;? that is, only samplings of the research on a per-project basis is being distributed to the public via the regulator monitors set up for each investment bank in the research settlements, and acquired from the aggregators.

Generally, ?sponsored? research is not included in this mix because it is too expensive. Whereas an existing ?subscriber?-based report can be had for a few hundred dollars, because it has already been produced, a ?sponsored? research report, built from scratch, could run $30,000 to $50,000, depending on the complexity of the assignment.

Investrend Research, for example, does not provide reports directly, but is an intermediary, or facilitator, accepting enrollments from or for public companies with no other or little coverage, and then itself pre-paying contracting analysts to produce the reports. This separates the analysts from any pecuniary interest in the outcome of a report and then Investrend Research is obligated to the analyst to publish and distribute the report when the analyst is ready to publish, again removing Investrend Research from any oversight or decision-capacity regarding the finished report. This process was pioneered by the firm over ten years ago, and many of its long-established procedures form the foundation of those practiced by many of its ?competitors,? and are incorporated into the ?Standards? adopted and practiced by over a dozen of its peers.

Recently the standards-based ?sponsored? research providers have gained support from the not-for-profit Shareholders Research Alliance, Inc. (http://www.shareholdersresearch.com), which was formed to provide outside investor monitoring of research providers? procedures and ?independence? from conflict. The Shareholders Research Alliance, Inc., plans a national membership and monitor push during April.

InvestorSide has published its own code of ethics at

investorside.com, designed to ?maintain highest standards of integrity and professionalism,? ?promote truth and fair representation in investment research,? and ?serve investors forthrightly.?

Gradient was listed as a member when the initial lawsuit, by Overstock.com, was filed, charging collusion with Rocker Partners in producing research alleging, among other things, that Rocker Partners was allowed to ?front-run? positioning that disadvantaged other Gradient subscribers, and then distributed those findings to the public through ?friendly reporters? such as Herb Greenberg, then a columnist for TheStreet.com and it its co-founder, CNBC media personality James Cramer.

Greenberg is now with Dow Jones, but remains, like Cramer, a regular talking head at CNBC. Both were among the three ?journalists? subpoenaed by the SEC in its own regulatory investigation of Gradient, Rocker, SAC, Overstock.com, Biovail and a half-dozen other companies purportedly followed by Gradient, including but possibly not limited to AstraZeneca, (NYSE: AZN) Avon Products (NYSE: AVP), Baxter International (NYSE: BAX), Netflix (NASDAQ: NFLX), Novastar (NYSE: NFI), Celgene (NASDAQ: CELG), Cardinal Healthcare (NYSE: CAH), Intermune (NASDAQ: ITMN), Biolase (NASDAQ: BLTI) Take-Two Entertainment (NASDAQ: TTWO), King Pharmaceuticals (NYSE: KG), Swift Transportation (NASDAQ: SWFT) and Taser (NASDAQ: TASR).

The InvestorSide website does not currently list Gradient among its members. There has been no announcement or explanation for its absence.

The key question remaining for the ?subscriber? community, represented to some degree by InvestorSide, is how many other ?subscriber-based? members are producing ?custom? reports, essentially crossing over to the different set of ethics required of ?sponsored-based? members of the FIRST Research Consortium, and are they making the compensation disclosures required by SEC Regulation 17(b).

The secondary question has to do with policies, disclosures or outright ban on members and their analysts investing in the stocks of companies under coverage in ?subscriber? environments.

The CFA Institute, which credentials analysts working in all research environments, including institutional, subscriber, sponsored, investment banking and in individual, contractural relationships, does not ban stock ownership by analysts in companies they cover. The CFA Institute?s ethics and standards describe a rather convoluted formula for such ownership, but does not address the central conflict. In banning ownership by ?sponsored? providers, however, in its ?Issuer/Analsyt Guidelines,? there is an implicent admittance that it is a conflictural practice.

In discussions with FinancialWire, ethicists for the CFA Institute have admitted such a ban could prove a problem for the CFA Institute because it could result in massive membership drops.

Spitzer, interviewed earlier this year by FinancialWire, was caught off guard by the issue. ?I think a lot of investment banks do individually ban stock ownership by its analysts,? he stated.

Told that is true, and asked whether that is not in itself a prima facie case for universal bans on stock ownership by analysts covering companies, Spitzer, then beginning his run for Governor, told FinancialWire he?d have to ?get back to you on that.?

Greenberg and Cramer have each, in their own way, acted in what many observers believe to have been relatively outrageous, and both have appeared together on the air to discuss their SEC subpoenas issued as part of the formal regulatory investigation.

Sitting with Greenberg, Cramer wrote ?BULL? across the face of his subpoena and tossed it on the floor, giving rise to speculation that CNBC?s parent, General Electric (NYSE: GE), might not long tolerate an on-air personality that showed open disrespect to an official government subpoena and investigation, although his show, ?Mad Money,? continues to have strong ratings among a niche, boisterous audience.

About ten years ago, CNBC?s equally renowned personality, Dan Dorfman, in the midst of a similar investigaton, was first found ?not guilty? by an internal CNBC investigation, and press releases supporting him were issued by the station before truth emerged and the hammer fell.

Greenberg?s seeming outrageousness has emerged in his subsequent all-out support for Gradient, even in the face of changing explanations of its procedures and intentions that has left no doubt it had any set or thought-out policy to begin with, and inexplicably, his on-air disdain for the kind of investor transparency contained in Regulation 17(b), arguing it is not ?applicable,? despite the underlying ethical issues regarding disclosure.

?The bugaboo, according to those attempting to turn this molehill into a mountain, is that Gradient's reports didn't disclose when a report was the result of a request by another client,? Greenberg stated Wednesday. ?That is not a run-of-the-mill legal matter but a First Amendment issue.

?Never mind that private research firms without brokerage or trading arms aren't considered investment advisers and therefore aren't regulated by the Securities and Exchange Commission. My take on this, as I've been saying on CNBC in recent days, has been: So what??

In a break with CNBC tradition, Greenberg?s odd positionings on the subject have been continuously questioned and even challenged in on the air exchanges between himself and Gasparino.

Greenberg was not asked and did not explain whether he had come upon advance copies of Gradient?s reports at a time when Gradient claims he did not see them for two to four weeks afterwards, and neither he nor Gradient were asked to explain how negative reports ?sponsored? by subscribers such as SAC Capital juxtapositioned to the positive reports, as has been alleged, on the same company by its vaulted ?quality of earnings? research available at the same time, and as CNBC quickly disclosed, are part of the data used by the network via MSN Money, a division of Microsoft Corp. (NASDAQ: MSFT), and where its network website is currently parked.

Despite the various charges, there is some apparent misinformation floating around. Some of it has to do with what the SEC is looking for. Informed sources tell Investrend that the SEC, which has not yet ruled on whether the ?journalist? subpoenas will be enforced after an initial media-inspired flap between SEC Chair Christopher Cox and his chief of enforcement, Linda Thomsen, is being very specific about its investigation.

The SEC investigation purportedly is about insider trading, and secondly, collusion. Collusion is more difficult to prosecute, since the parties involved will have to have ?knowingly? and maliciously and ?intentionally? colluded.

One of the disconnects seems to be that Gradient is claiming that reporters such as Greenberg received their reports two to four weeks after they produced them, yet some online detractors have alleged that Greenberg actually disseminated certain Gradient reports to the general public rather instantly after they were produced, even perhaps having them in his possession before they were distributed to subscribers.

The questions are then raised as to whether Greenberg?s and TheStreet.com?s distributions were part of a wider public campaign to manipulate the stock downward in either ?lockstep,? ?collaboration with? or in ?collusion? with Gradient, and possibly SAC Capital or Rocker Partners, which ?incidentally? was apparently the second largest shareholder in TheStreet.com, behind only the founders, including Cramer. Recently Cramer and other insiders have been exercising options and otherwise selling stock in the company, which was at least temporarily being shopped around.

Rocker appears also to have recently substantially decreased its holdings in TheStreet.com, which separately from Cramer received its own SEC subpoena. Presumably the company is responding, as there has been no public display of the company?s subpoena being marked up with ?BULL? and tossed on the floor.

The SEC investigation does not necessarily involve the same objectives as the civil lawsuits filed by Overstock.com and Biovail, meaning many of the discovery issues may be expanded in the civil lawsuits.

One charge floating around has to do with Pinnacle, a hedge fund operated separately from Gradient but in the same offices, during the period of these inquiries and lawsuits, and by the same principles, when Gradient was operating under its previous incarnation as Camelback Research.

However, sources tell FinancialWire that despite the appearances, Pinnacle was a relatively small fund and did not trade in the stocks of companies covered by Camelback / Gradient. Sources also say that Camelback / Gradient had received a ?no-action letter? from the SEC regarding Pinnacle, although that has not been independently confirmed. If so, of course, as is said in Texas, despite the appearances, ?that dog won?t hunt.?

Another allegation contained in some of the affidavits connected to the Overstock.com and Biovail lawsuits is that Brian Harris, a copy editor for TheStreet.com who worked under Greenberg, was provided office space by Camelback / Gradient and ?ghost-wrote? reports for them while still working for TheStreet.com, or immediately afterwards. Adding to the perception of impropriety is the fact that Harris?s name ?mysteriously? disappeared from TheStreet.com masthead about the same time the allegations surfaced.

Sources say that once again proprieties may have been unnecessarily compromised by perceptions, and that there is scant evidence Harris was provided office space. Also, it appears that Harris came upon Gradient through Greenberg?s writings about the company, and inquired about a possible change of careers. Sources say that Greenberg helped to facilitate an introduction, but that after Harris was given some opportunities to do some work, Gradient decided it wasn?t a fit, and discontinued using him. At the same time, TheStreet.com appears to have removed his name because he could not be employed by both. While improprieties may have existed elsewhere, and that will be determined either through the civil courts or the SEC investigation, that part of the ?conspiracy? plot thins.

Whether the SEC will continue to press for the subpoenas at this time issued to the three reporters is a matter of conjecture. Former enforcement officers who have served as sources to FinancialWire say the ?subpoenas will stand.?

However, the SEC has ?backdoored? its email and communications collection efforts by including the same request to Gradient, not only for the three named reporters, but several others, such as Roddy Boyd, reporter for the New York Post, Bethany McLean of Fortune Magazine, Jesse Eisinger of the Wall Stret Journal, Elizabeth MacDonald of Forbes Magazine, and former Barron?s editor Cheryl Strauss Einhorn, who is married to a hedge fund head David Einhorn.

Even FinancialWire has had some inaccuracies related to at least one of these reporters. Boyd said he had never heard of or contacted Gradient before the lawsuits, and if so, would not have much of interest related to public ?dissemination? of reports meant for ?subscribers? to provide the SEC, as say, might Greenberg. Also FinancialWire had idenfified Boyd as being among the media coming to the defense of the ?journalists? who were subpoenaed, without having revealed the SEC had asked for his communications. First, Boyd may have been confused with a New York Post columnist, Christopher Byron, and secondly, Boyd said he had learned of the SEC?s interests in his communications with Gradient only recently after seeing it in the Wall Street Journal.

In a sound-bite world, the issue of how powerful hedge funds, largely unregulated, have come to dominate the financial markets not only in the U.S. but abroad, has been somewhat shunted aside; however, this is no doubt the key question facing regulators today, and the key factor associated with the unevenness of the playing field that may be keeping smaller investment capital on the sidelines.

Trust comes only with disclosure and transparency, and the ever-more secretive hedge funds, with little or no disclosure and little or no transparency, are easy prey for conspiracy theories. Whether some or much of that is deserved will never be known as long as they are allowed to operate in the shadows and often out of the range of regulators in their offshore havens.

In its ?60 Minutes? coverage of the Biovail ? SAC controversy, for example, an image of founder Steve Cohen, whose secretive $8 billion hedge fund made him half a billion dollars this past year, and who lives in a palatial estate in Greenwich, where many of the other top hedge fund operators reside, was portrayed only as a face in a crowd.

The hedge fund is said to have already attracted over $2.5 billion to another $3 billion fund, requiring investors to invest for three years, while paying a 3% management fee and a 35% incentive fee. There appears to be no shortage of takers.

As to Rocker Partners, that hedge fund, which specializes in short selling, has from time to time been said to be short on as many as 2/3rds of the companies listed on the New York Stock Exchange that have been listed on Regulation SHO, meant to provide some transparency to the issue of ?naked? short selling, which unlike the venerable practice of short selling that helps bring balance to valuations in the marketplace, is manipulative and illegal.

Regulation SHO has indeed brought transparency, but not corrections, to the marketplace, as many of the fails to deliver, required by law to settle within a few days, have existed for the entire year that Regulation SHO has been published, with nary an SEC enforcement action connected to Regulation SHO.

There have been isolated SEC and NASD charges against naked short sellers, including some connected to the largest investment banks, but the fines and penalties associated with those actions have been so minute as to serve as little more than a ?cost of doing business illegally? penalty. Few of these actions put anyone except those manipulating the system at the lower level out of business, and even then, rarely on a permanent basis.

Beginning in February, hedge funds advisers have had to register with the SEC.if they have under $25 million in under management and money not locked up for more than two years. That would appear, for example, to exempt the new SAC Capital Management hedge fund, despite its immensity and impending power in the marketplace.

Defending a case against Biovail or some other small company would also be ?chump change? to a fund of this size.

According to the New York Times, the advisers whose funds are not exempt are subject to random audits, strict requirements about books and records, the designation of a chief compliance officer, and inquiries about where the advisors live, how much money he or she manages, and whether there is any criminal history. They must also now follow the same rules as mutual fund advisors, but not performance fees, such as the seemingly exhorbitant fees charged by SAC Capital.

Unlike mutual funds, hedge funds will not have to file quarterly reports listing the securities they own, file semiannual reports to shareholders, disclose voting on proxies, an independent chair and majority of independent directors, or a requirement allowing only one class of stock to be issued.

Even New York Times columnist Joseph Nocera, who is scheduled on a panel with Greenberg at the May 1 annual conference of the Society of American Business Editors and Writers (http://www.wwwsabew.com), where SEC Chair Cox has also committed to appear, is backing away from his previous over-the-top take on what he has not considered more diligently may be going on.

Sunday, his column stated, ?It is certainly possible that something bad happened among SAC, Gradient and the other so-called conspirators. If Gradient knowingly disseminated false information (which it denies), that's a problem. The accusation I find most troubling is that Gradient held off releasing a tough report on Biovail at the request of SAC, which was still building its short position. If that actually happened ? and again, Gradient vehemently denies it ? it would, at the least, be extremely sleazy, if not illegal. In The New York Times that Sunday, Jenny Anderson examined the complicated issues raised by the Biovail-SAC lawsuit and pointed out the problem areas.?

Nocera continued, however, to obfuscate the difference between short sellers, which he said he felt the necessity to ?defend,? and manipulative, illegal ?naked? short sellers, which once more he ?forgot to mention,? once more leaving his readers thinking the flap is over legitimate market forces.

Naked short sellers, whose actions create unfathomable fails to deliver, huge net deficiencies at cooperativing brokerages, counterfeit shares that obscure the one-share, one-vote rules on Wall Street (votes are already secretely ?rounded? to resolve the resulting mathematical challenge) many believe, are at the root of a coming calamity in the marketplace.

In an increasingly investor proactive world, these dilutions of investors? voting rights can be the difference in many corporate reforms as well as the election of directors. A court challenge could turn into a mess, and put many of those engaged in this band-aid solution at legal risk as well.

Dr. Susanne Trimbath, a former Director of Transfer Agent Services at the Depository Trust and Clearing Corp. and former regulators at the SEC, say the size of naked short positions are sufficient to implode the financial markets. Dr. Trimbath says those naked short positions ?grandfathered? last year, and now in the fails-to-deliver backlog at the DTCC, are enough to ?give me nightmares.?

The problem with the DTCC, which is actively seeking to entirely do away with paper in favor of computerized shares, is that there is little or no accountability whatsoever, and it has resisted every effort to provide transparency, even in the number and placement of shares held for any public company.

Dr. Trimbath, who recently testified a a forum on naked short selling sponsored by the North American Securities Administrators Association, which currently has a task force armed with subpoenas trying to extract information from the DTCC, even says, effectively, that the DTCC is not being ?honest? with its ?stock borrow? program?s books.

?Since nothing prevents the buyer who receives a borrowed share for settlement from depositing shares into the lending pool at the Depository, it is self-replenishing,? she states.

?The stock borrow program doesn?t track who lent the share (only who borrowed it). So the stock borrow program doesn?t allow ANY shares to be lent?only borrowed, get it? They play the same word game when they say they don?t make money on the stock borrow program.

?They don?t.

?What they DO make money on is the stock lending program.

?By the way, they also make money on fails to deliver. OK, so the same shares aren?t lent twice by the same broker because the lender?s account is reduced by the number of loaned shares until the loan is repaid. Fine. What they aren?t saying is that the shares are a ?fungible mass,? and no one keeps track of which share was used to settle which trade. So, a Participant who receives 100 shares of OSTK at settlement could be getting 50 borrowed shares. And it is those 50 shares that can be loaned a second time since all settlement is considered to be ?final?.?

This is despite the fact that the DTCC is a quasi-government entity, owned by two SROs, the NASD and the New York Stock Exchange. Its board of directors is a who?s who of conflicts, with almost no one representing the public or anyone outside a tight-knit group of brokerages and institutions.

Many view the whole enterprise as a house of cards, and no wonder. While the regulators rightly require transparency on the part of public companies, they not only show little interest in enforcing the transparencies required by laws already on the books, they have taken very few initiatives to require their biggest institutions to tell shareholders whether they even own a share, or a whole share, of a company they believe they are invested in.

Congress has shown interest, but not enough to date to call their regulators and SROs on the carpet to explain any of this, much less change it.

[Gayle Essary is President and CEO of Investrend Communications, Inc., parent to both Investrend Research and Investrend Research Syndicate, and has actively supported indepdendent research reforms. Investrend is also parent to Investrend Information, which publishes FinancialWire. He has long been a practicing journalist as well, and his journalism credentials are at investrend.com }.

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