Articles Tagged with Rule 204

Stoltmann Law Offices is investigating cases where brokers have violated rules on selling “naked shorts,” an extremely speculative options trading strategy.  In volatile markets, brokers transact strategies designed to make money on stocks their clients don’t own, known in the industry as “naked short selling.” In a recent regulatory action, Finra, the federal securities industry regulator,  announced that it has fined UBS Securities LLC (UBS) $2.5 million for violating Regulation SHO (Reg SHO) governing naked shorts for “violations and supervisory failures spanning a period of nine years.”

FINRA found that “from 2009 to 2018, UBS did not timely close out at least 5,300 ‘failure to deliver positions’ and routed or executed more than 73,000 short sales in securities with an unsatisfied close-out requirement without first borrowing or arranging to borrow the shares.”

According to the U.S. Securities and Exchange Commission, “in a naked short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard two-day settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due; this is known as a ‘failure to deliver’ or ‘fail.’” The agency last updated its rule on short selling in 2008 to curb abuses in the industry.

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