February 7, 2022
Penalties for Crime/Violation: Penalties for crime/violation have amounted to only a fraction of the cost of the crime/violation. This results in the crime being profitable therefore, financial crimes are currently encouraged. This amounts to \"the cost of doing business\" and only encourages further crime. The penalty for financial crimes should amount to, at a minimum, the impact of the crime/violation PLUS an additional penalty fine. This would cause committing the crime to cost MORE and put a party at risk when considering to commit the crime. In addition, incarceration should be a standard part of the penalty. Crime needs to be discouraged, not encouraged.
Naked shorting: Naked shorting takes place when investors sell shorts associated with shares that they do not possess and have not confirmed their ability to possess. It is currently illegal, but is not tracked or enforced. Naked shorting should be ended in its entirety ASAP. It is currently an illegal practice, however, the practice continues. Naked shorting halts both price discovery as well as a fair and transparent market. Any naked shorting violation should be met with steep penalties.
PFOF: Payment for Order Flow (PFOF). Payment for order flow causes a conflict of interest and creates conditions where the market makers route trades in their best interest and not the investor's. This creates a non-transparent marketplace.
Directly Owned Shares (not owned by a proxy in our name): Shares should be immediately owned by the purchaser, NOT the trading firm. Investors currently purchase shares of a company through trading firms and believe that they directly own the shares in their names. However, it has come to light that the investor does not own the shares, but the investment firm owns it as a proxy to the investor. This is not transparent. This practice removes rights from the investor, such as voting rights in stockholder meetings. It also creates conditions for illegal Naked Short Selling and halts price discovery, resulting in a fraudulent market. Shares should immediately be direct registered in an individual investor's name at the time of purchase.
FTD and IOUs: IOUs for shares should be halted ASAP and made illegal. Technology exists today where the IOUs are no longer needed or beneficial. The mechanism that allows IOUs allows Failure to Deliver (FTD) conditions. FTDs create a non-transparent and fraudulent market that halts price discovery.
Self-Regulation: Self-regulation for financial compliance should not exist and should be halted immediately. This is the 'fox watching the hen house' and allows self-regulating entities to bend or interpret the rules to their favor. It also allows those entities to 'look the other way' while they perform the crime. Technology exists today where data is immediately available and can be audited/regulated directly by the SEC. Though the SEC may not currently have the funding or capability for this, the creation of a department will quickly pay for itself through the reduction of financial crimes.
Thank you for allowing my input.