Susanne Trimbath DTCC fact checker:
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"According to the Press Release, the DTCC contends that they were not invited to speak at the NASAA Public Forum held in November to discuss the issues of Naked Shorting. Mr. Lambiase, Director of Securities for the State of Connecticut and moderator of the forum, specifically identified to the audience attending the forum that the DTCC was invited to attend but had declined the invite. Panelist Dr. Susan Trimbath, former Operations Manager for the DTCC, also confirmed the DTCC invite during the forum discussions."
from DTCC Continues Public Campaign Stop blaming us; it s not Our Fault January 26, 2006
David Patch
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5. INSIDE THE BLACK BOX
I worked not only at DTC in New York, but also with the Pacific Clearing Corporation in
San Francisco. I have the experience necessary to talk about what happens inside clearing
and settlement. Please don’t misquote me as saying I worked for DTCC because I
actually worked for their predecessor DTC, with only one C. Last February a reporter in
New Jersey put an extra “C” in my resume and DTCC had to issue a media statement
clarifying my employment record. Let’s not put them to that trouble again, OK?
Seriously, all the details of my background are in my bio.
Susanne Trimbath
stpadvisors.com
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hedgeworld.com
DTCC Questions Facts in Naked Shorts Squabble
By Christopher Faille, Financial Correspondent | Thursday, March 16, 2006
NEW YORK (HedgeWorld.com)—In the increasingly heated public dispute over "naked" short sales of securities, the Depository Trust & Clearing Corp. fired an unexpected volley Tuesday [March 14], issuing a statement on the "purported work experience of a former employee" at one of its subsidiaries.
The former employee, Susanne Trimbath, was a manager of transfer agent services at the Depository Trust Company from 1987 to 1993. This work experience became relevant to the controversy over what is now DTC's corporate parent, DTCC, because on Feb. 23 Ms. Trimbath participated in a hearing of the New Jersey State Senate Judiciary Committee, and there criticized Bradley Abelow, the governor's nominee for state treasurer.
Mr. Abelow (who has since been confirmed as treasurer) was a director of the Depository Trust & Clearing Corp. from 2002 to 2005 Previous HedgeWorld Story, so certain individuals who believe that DTCC has enabled short sellers' failures to deliver (FTDs), thereby empowering shorts at the expense of targeted issuers, used the opportunity created by the confirmation hearing to put their case before the public.
At the hearing, Ms. Trimbath referred to herself as a "former employee of the Depository Trust and Clearing Corporation," and then said that for simplicity she would thereafter refer to DTCC and its subsidiaries as the "Depository." She didn't indicate that she had ever been an officer.
Her self-introduction appears to have been a misstatement in at least one respect. She wasn't an employee of DTCC, which didn't exist until 1999. She was an employee of DTC, which later became a subsidiary of DTCC. In a telephone conversation the evening of DTCC's press release, Ms. Trimbath said that she agrees with the facts of her employment history as that release sets them out. She was employed at DTC prior to the formation of DTCC as a holding company in 1999.
DTCC's statement expresses concern about misrepresentations not by Ms. Trimbath but by unnamed third parties. It states, "[I]naccurate information … has appeared in the press and … on Web sites and in public forums" portraying Ms. Trimbath as a former officer, and an "expert on clearance and settlement and the Stock Borrow program."
DTCC said that Ms. Trimbath was a "manager of transfer agent services, a corporate middle-management position below officer level." Nothing in her testimony was inconsistent with that characterization, nor did she quarrel with it Tuesday. She testified that she wanted the committee to consider "how you can have year-long failures to settle trades," and that the answer to that question was and is "lax management at the Depository and a willingness to look the other way when broker members neglect their fiduciary duty to small investors."
She said that she saw the hearing as "an opportunity to bring to light a failure of management [at the Depository] to address this issue" concerning failures-to-deliver "a decade ago when it was merely a thorn in somebody's side." She also said that before she went to work at DTC as a transfer agent, she had been an operations analyst for the Pacific Clearing Corp. She was surprised and flattered to find that she's important enough for DTCC to issue a release making the distinction between Depository officers and employees with special reference to her.
Challenge and Response
On the more substantive issues in dispute, a challenge to DTCC and its policies this week from a former Clinton administration economist, Rob Shapiro, has drawn a point-by-point reply from its target.
Mr. Shapiro's consultancy, Sonecon, issued the report Tuesday under the dramatic headline "500 Million Shares of Stock Are Missing." It contends that DTCC's settlement and clearing process "implicitly permits naked short sales by using bookkeeping entries and the holdings of members uninvolved in those sales to ‘clear and settle' short sales even when the short seller persists in failing to deliver the shares he has sold short." In quantitative terms, the report states that the consequences of FTDs are concentrated on a small number of issuers.
On any given day, it states, almost half of Nasdaq and NYSE threshold stocks—from 50 to 80—may account for as much as 95% of all fails in listed firms. The average fails for those 50 to 80 shares are between 1.5 million and 2 million shares each.
On any given day, also, about two thirds of over-the-counter threshold securities, 60 to 80 stocks, make for the vast majority of FTDs in OTC companies, with average fails at 4.3 million to 4.8 million each.
The report argues for the following conclusions:
• Designation as a "threshold security" doesn't necessarily reduce short sales, and has proven consistent with an increase in the number of fails-to-deliver in the case of many securities;
• DTCC's lack of transparency "undermines the efficiency of U.S. capital markets and could damage investor confidence;" and
• Data indicates that Reg SHO "has not created the market conditions or regulatory requirements needed to ensure that naked short sellers (and others) resolve any large, outstanding fails."
When asked for a response, DTCC prepared a statement Wednesday [March 15] listing what it saw as the flaws of the report, beginning with the bias of its author. Mr. Shapiro "has admitted to DTCC he is a paid consultant" for law firms that are pursuing claims against DTCC.
DTCC objects to the report's presumption that it possesses, but has failed to employ, buy-in authority—i.e., authority to purchase the necessary shares itself for delivery, while charging the account of the naked short seller's broker. DTCC said that the Securities and Exchange Commission has repeatedly said it doesn't have that authority.
DTCC said that Mr. Shapiro misleadingly speaks of naked short sales and FTDs as synonyms, which is a distortion. There are many reasons aside from short selling why a delivery may not occur on settlement date. "Many times the member will experience a problem that is either unanticipated or is out of its control, such as … delays in customer delivery of shares to the broker dealer," it said.
DTCC said that SHO has in fact reduced the number of outstanding fails. Within the first three months of the program, it produced a 10% reduction in aggregate fails, and a 32% reduction in fails regarding companies on the threshold list.
As to disclosure, DTCC said that it doesn't necessarily possess the data that Mr. Shapiro demands it disclose. "While we have data on the volume of fails, we have no information on the underlying causes of those fails. As noted above, there are many causes of fails," it stated.
There are good reasons, it also argued, for it to be less than transparent: Data on fails could be used for purposes of market manipulation.
CFaille@HedgeWorld.com |
