Penson: naked-short video a "hoax'

Company fires off letter to SEC and Finra defending its trading system

Oct 11, 2009 @ 12:01 am

By Dan Jamieson

Officials for Penson Financial Services Inc. said that a video circulating on the Internet of one of its traders engaging in an apparent naked short sale is a fraud that unfairly accuses the firm of violating Securities and Exchange Commission regulations.

In a letter sent last week to both the SEC and the Financial Industry Regulatory Authority Inc., Tim Davis, associate general counsel at Penson, called the video an “apparent hoax” that made “an unsupported accusation of a violation of Regulation SHO by Penson.” Reg SHO is the SEC's short-sale rule that requires a short-seller to first locate a stock before shorting.

At issue is a YouTube video, titled “Penson Approves Billion Share Naked Short,” that purports to show an unidentified trader getting a “locate” — a potential lender — for a large number of shares of an unnamed stock through Penson's trading system.

Rolling Stone journalist Matt Taibbi, who runs the blog True/Slant, has used the video to criticize the practice of naked shorting, in which shares sold short are never delivered.

In a post last Monday on his site, he said that the amount shown was in the “tens of billions of shares” but that the float for the stock was just 5.5 billion shares.

Andy Yemma, a spokesman for Penson, said that one version of the video shows that Citigroup Inc. stock is the issue being “located.”

Mr. Davis told regulators that Penson's internal records show no locates of the stock and that the trading system shown isn't Penson's.

Daniel Son, president of Penson's parent, Penson Worldwide Inc., said several “doctored” versions of the video have appeared on YouTube.

In his post, Mr. Taibbi said that the video had been given to him last week. He didn't name a source.

Mr. Taibbi didn't respond to an e-mailed request for comment.

In his letter to regulators, Mr. Davis said that Penson was uncertain if the video was a hoax “or something more deliberate.”

Penson clears for 546 correspondent firms in the United States, Canada and the United Kingdom.

The video and Penson's response were reported earlier by the Business Insider/Clusterstock website.

E-mail Dan Jamieson at djamieson@investmentnews.com.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Female leaders highlighted as future of financial advice

InvestmentNews recognized 20 Women to Watch for their efforts to advance the financial advice industry.

Latest news & opinion

Principal-Wells Fargo retirement deal would be among largest ever

Acquisition would be in line with trend of record keepers seeking to gain scale to combat fee reduction.

ESG options scarce in 401(k) plans

There's growing interest among plan participants, but reluctance to add funds that take into account environmental, social and governance factors persists.

Ameriprise getting ready to launch its bank

Firm's advisers will soon have access to lending products such as mortgages.

Envestnet acquires MoneyGuide for $500 million

Deal will allow Envestnet to deepen integrations between MoneyGuide and its other wealth management solutions.

Genworth move could signal big shift in distribution of long-term-care insurance

Insurers may turn to direct-to-consumer sales only, bypassing brokers and insurance agents.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print