Feb. 06, 2022
34-93784 Prohibition Against Fraud, Manipulation, or Deception in Connection With Security-Based Swaps; Prohibition Against Undue Influence Over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions I am writing to voice my support for this new rule. I think that it the current practice of settlement of short sales on securities allows for gross manipulation of the underlying price of securities. My qualifications are that I am a retired accounting and finance professional, having held numerous positions in corporate America at the CFO and Controller level in several Fortune 1000 companies and with numerous company equity transactions. In addition, I have earned a degree in Economics, an MBA in Finance and a CMA or Certified Management Accountant. My analysis is from a straight accounting and economics point of view. In the current setting. the short selling of stocks allows the seller to collect 100 percent of the income and pay a borrow rate that is minimal. Since the security being sold is never bought, there is not a cost of goods sold. The seller is able to realize income of about 99% of the revenue and in practice never close the transaction. The majority of these sales goes through dark pools and the supply is not matched to the demand. This results in downward pressure on the price of the security such that the price of the security no longer reflects the true value of the stock. This becomes relevant to the proposed rule affecting security based swaps because the value of the underlying asset can be misstated . This is because the bundle of fraudulent stock can be sold at the market price while the true value of the stock is zero. Once the fraud is uncovered, the basket of swaps will be revealed as overpriced and could lead to massive market disruption. Gary McClernan Kenwood, CA