Skip to main content

Ricky Lam Comment On Regulatory Notice 21-19

Ricky Lam

Dear FINRA: Firstly, I would like to thank you for giving the investor community an opportunity to be heard. For countless years, the investor community is deeply frustrated over the continuous manipulation of our financial system. I would like to address the following deep rooted issues regarding short selling within our financial system, and suggest possible solutions to mitigate risk in the financial markets. - There is a huge concern as to why short share availability, and short interest percentage is self-reported by financial institutions. The idea that financial institutions are following “a code of honor” instead of tangible regulatory oversight is illogical. In comparison, would you allow your local restaurant to give themselves their own health grade? There should be a regulatory mandate and stricter oversight in report realistic, accurate numbers that is reflected in financial disclosures. - In theory, short selling may act as a “market check” against overvalued securities. When applied in real scenarios, hedge funds, and large financial institutions utilize short selling as a motive to intentionally bankrupt companies, never intending to return shorted shares borrowed as their penultimate goal. Short selling should solely act as a “market check”. Therefore, to mitigate risk to the financial system, there be a should be a mandatory return of short borrowed securities after a given date. - While in theory, trading should, on occasion, should occur off-exchange, also known as dark pool trading, to prevent unnecessary fluctuations in a stock ticker’s price. However, hedge funds and financial institutions have created a “pay to win” scenario in the financial market by allowing short selling to occur off exchange. It is illogical for any institution to short sell a security off exchange. Hedge Funds and Financial Institutions are given an unfair advantage of being able to pick and choose where it can trade, leading to manipulation in the stock market. Therefore, short selling should not occur off exchange. - It is illogical as to why financial institutions are allowed to overleverage their portfolios with short positions resulting in millions of failure to delivers. In comparison, when an average debtor who uses up its credit limit, their lender pauses any further lending until the debtor is paid. When a short seller reaches its limit, why it still allowed to continue furthering their positions? To prevent overleveraging a portfolio, instead of solely following “industry norms”, there should be a strict guideline restricting the use of short positions by factoring in possible foreseeable losses it may occur. - There should be stronger oversight in financial reporting relating to whether positions are legitimate long positions or misappropriated short positions. Whether or not the financial reporting is conducted in good or bad faith, reporting a misappropriated short position paints an unrealistic landscape within the financial markets, hindering all investors from knowledgeable investing. Again, I appreciate the opportunity for providing comment to the state of short selling within the financial markets. We as Americans are proud of our democratic and capitalistic values. I hope that my comments can provide better insight in how we can better the American financial system. Kind regards, Ricky Lam