Probably won’t affect anyone here…
https://oilprice.com/Energy/Energy-General/Is-This-The-End-Of-Naked-Short-Selling.html
While what is now an all-out war on naked short sellers intensifies, there is a new flashpoint on the front line–a potentially devastating ruling targeting those who are alleged to make illegal naked short selling possible: The Facilitators: bankers and brokers.
On September 29, Federal District Court Judge Lorna Schofield of the Southern District of New York issued a ruling that has the potential to significantly disrupt Wall Street compliance, and is a major first step towards protecting retail investors from fraud.
In Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc et.al, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges.
These broker-dealers have a “continuing responsibility to ensure that their customer’s order flow … is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm,” the judge ruled.
The defendants in the case had motioned to dismiss Harrington’s claims of market manipulation and spoofing (when traders place market orders and then cancel them before the order is ever fulfilled, manipulating prices in the meantime). Judge Schofield denied the motion after hearing arguments that broker-dealers are not responsible for “their customers’ trading”.
Instead, the ruling recognizes that not only are broker-dealers the gate-keepers who can enable illegal naked short selling, but they are responsible, and thus liable for their customers’ actions. Schofield described broker-dealers as “reckless in not knowing that the trades being executed at their customers’ direction were manipulative”.
h/t unwanted_hair
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