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Brijesh Malkan
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March 23, 2005

Market Wants OTC Short Sales Published

By John A. Byrne

A campaign has been started to thwart fraud in the obscure regions of the OTC markets. Even though individual investors have as much at stake, this effort is spearheaded by the Pink Sheets LLC. It has petitioned the SEC to amend a rule so that total short positions in customer and proprietary accounts are maintained in all publicly-traded equity securities. The NASD would collect and publish the information.

The current NASD Rule 3360 now requires securities traded on Nasdaq, or listed on a national securities exchange, to have records. However, the rule does not apply to Pink Sheets and Bulletin Board stocks. "The lack of short interest disclosure creates an opportunity for nefarious individuals and promoters to use the public's perception that OTC selling pressure is due to widespread naked short selling to facilitate unlawful pump and dump manipulations," writes Cromwell Coulson, CEO of Pink Sheets. "These unscrupulous manipulators fraudulently persuade investors to buy a stock on the theory that short sellers will eventually need to cover their short sales and thus be squeezed into paying higher prices for a limited supply of stock."