The Stock Market Is Patently Unfair

Trades Mean Something

In my column last week, Why Does Failure to Deliver Go Unpunished? , I described purchasing several blocks of shares of Overstock(OSTK Quote), shares that were not delivered within the required three-day settlement period, known as T+3. For four separate purchases, cash was taken from my mutual fund's account on the stipulated settlement date (T+3) and held in a separate account by a custodian bank. We waited as long as three weeks to get delivery of our property.

Since that column, I've heard similar stories from many other investors and money managers, including one from a major bank that has been waiting for delivery of Overstock shares for two months.

The manager at this bank says that the broker is going to cancel the trade. This should not happen.

In a fair market, with trading rules that are enforced, it would not happen. With over 300 stocks suffering from significant delivery delays, it's clear that there is a systemic problem in the market. The T+3 rule is frequently violated and the violators go unpunished.

Legislators Need to Get Involved

If a market can be abused, it will be abused. Hundreds of companies have failure-to-deliver problems. Shareholder voting is a farce. Trading rules are being ignored. Investors can't say with certainty what is in their accounts.

To hand off the market's problems to the Securities and Exchange Commission to solve behind closed doors is a less-than-optimal solution. In the interest of maintaining investor confidence, these issues are better served and solved in an open, transparent forum like Congress.

All that is needed is a member of Congress with enough courage and foresight to tackle these problems, before they develop into a crisis.

P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
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