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Investing 101 - Jun 2, 2005 - Printable Version
- Stockgate: Donaldson out......Cox in
by Mark Faulk
In a whirlwind of activity in the Securities and Exchange Commission today, it was announced that Chairman William Donaldson will resign on June 30, and Republican officials said that President Bush will nominate California Rep. Christopher Cox to take his place. Congressman Cox is currently chairman of the House Homeland Security Commission. Donaldson has his supporters, and in a just released commentary from Investrend Communications, Inc. CEO Gayle Essary, he applauds the current SEC Chairman's efforts to "advance the addition of Pink Sheet and OTCBB companies to the threshold lists", and contend that "he has been very cognizant of the need to take the stress off smaller public companies while still maintaining a course dictated to him by Senators who are unwilling to concede their mistakes."
Essary goes on to say that "We do not, as some have, revel in his departure, and we do not look forward to the filling of two positions on the Commission at the same time. This is not good news. Unless someone with an equal ability to listen and to act with some measure of caring to the people the SEC Commissioner represents is appointed, some who applaud his departure may soon get everything they don't deserve."
In an email from Investrend's Director of New Business Development Drew Connolly to the Faulking Truth, he says, in response to our article earlier today applauding Donaldson's resignation, " While I usually enjoy and often agree with the Faulking Truth, I believe you are way off base. I am a member of the recently appointed SEC Advisory Committee on Smaller Public Companies and was sworn in by Chairman Donaldson in April. This Committe was a response to our small public co. demands over the last several years and Mr Donaldson was the first SEC Chair to act. He has been villified largely for voting with the Democratic Commissioners on significant public policy issues."
Connolly continued, "Donaldson himself promised me to find out and address the reason(s) why short interest reporting is not available on the OTCBB or Pinks. This is now the subject of a proposed rule submitted by the President of the Pinks. In addition to my other roles, I am the Director of New Business Development for Investrend so I am no stranger (and in fact may be a source) of much of the media criticism on naked shorting, but attacking Donaldon is misguided in my judgement as he is both a knowledgeable and respected member of the financial community. He is also committed to small company capital formation. The mistake of having a knee jerk response is just that."
While we also agree with many of Investrend's views, we could not be further apart on this issue. It's true that Donaldson has had some success on reform, especially on the corporate side of the stock market, but his failure to aggressively address naked short selling is just that....a massive failure. "Short interest reporting" is nothing more than a band aid, in my opinion, and adding Pink Sheet and OTCBB stocks to the SHO Threshold List, where many major companies, including Delta Airlines, Martha Stewart Living, Netflix, Taser, Global Crossing, and Krispy Kreme, have languished for over 100 days without recourse, is a joke. Furthermore, Donaldson's inability to adequately address questions about naked short selling from Senator William Bennett and others during recent Congressional hearings shows a lack of clear leadership on this important issue.
As the head of the governing body of the stock market, had Chairman Donaldson taken a strong stand on the issue early on, we wouldn't be where we are now....so deeply entrenched in the scandal that it's nearly impossible to correct it without major damage to the stock market itself. He should have addressed this at least a year ago, if not earlier. It is the very inaction of the SEC over the course of years that has allowed this scandal to escalate to the point where they felt compelled to "Grandfather" in past abuses in fear of throwing the market into chaos.
It is this same inaction that prompted Missouri Senator James Talent to say in a memo about the issue of naked short selling, "As far as I know, no one in the government was held accountable for this failure.”, and “In other words, firing a few people at the SEC will light a fire under law enforcement more than hundreds of pages of new regulations."
As for Congressman Cox, we feel that he might very well be an improvement over Donaldson, but only time will tell. While we don't agree with his stands on many issues, his credentials as an advocate for small businesses and against Government waste make him an intriguing choice. This is from his bio on his Congressional webpage:
Rep. Cox's expertise and his thoughtful approach to legislation have earned him bipartisan support outside of Congress as well. In 1994, President Clinton appointed him to the Bipartisan Commission on Entitlement and Tax Reform. The Los Angeles Times, in a rare endorsement of a Republican, called him "an intelligent spokesman for fiscal responsibility and an expert on foreign affairs." George Will, writing in Newsweek, praised Cox's efforts to bring honesty to the federal budget process. And The Wall Street Journal featured him as a key leader in a page-one profile on the historic opening day of the 104th Congress.
Rep. Cox has won numerous awards from taxpayer, business, and consumer advocacy organizations. These include being named a "Taxpayer Hero" by the National Taxpayers Union and Citizens Against Government Waste; a "Tax Fighter" by the National Tax Limitation Committee; a "Hero of the Taxpayer" by Americans for Tax Reform; a "Super Friend of Seniors" by the 60/Plus Association; a "Guardian of Small Business" by the National Federation of Independent Businesses; and a "Friend of the Consumer" from the citizen watchdog group Consumer Alert.
After years of ignoring the small investor and allowing the rampant counterfeiting of shares through naked short selling, we believe that it is time for a change in the SEC, and we hope that Congressman Cox will aggressively address these issues, and make our markets a better place to invest. In the words of John Lennon, "It can't get any worse". And that's the Faulking Truth.
Contact Congressman Chistopher Cox at http://cox.house.gov/html/contact_email.cfm , and educate him on the importance of addressing the naked short selling scandal.
Read our article from May 31st, entitled "Stockgate: Turning up the Heat", at http://www.faulkingtruth.com/Articles/Investing101/1028.html
Add your name to our Stockgate Activist mailing list, and voice your opinion on our Stockgate forum on our new Message Board at http://www.faulkingtruth.com/ We will email you only when we have new articles or information dealing with this issue. Please link the articles everywhere you can, post them on stock message boards, and send them to the appropriate public entities. To enact positive change requires positive action.
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