SEC Could Use 'Naked-Shorting,' Apple Alerts

NEW YORK (TheStreet) -- Critics have been saying for a long time that the Securities and Exchange Commission misses all the big investor issues of the day, and is at least 30 years behind the times. That is tragically unfair. Why, look at the Investor Bulletin that the SEC just generated, warning of the dangers of a spanking new investor concern called the "reverse merger."

The SEC isn't 30 years behind the times. It's 25 years behind the times, and not a second more.

As I mentioned in this space last August, reverse mergers have been used by stock scamsters since the 1980s as well as by legitimate companies, and at best are red flags. The SEC is probing a network of Chinese small-cap stocks that are a product of reverse mergers, including China Sky One Medical (CSKI), Fuqi International (FUQI) and Rino International (RINO).

I'm glad the SEC's investor-education apparatus has moved so forthrightly into the concerns of the 1980s. All they need to do now is to move into the 1990s and maybe -- who knows? -- in 20 years or so they'll catch up with the 2000s. In furtherance of that goal, as a public service, I am taking the liberty of suggesting other topics of future SEC Investor Bulletins:

Reverse Stock Splits. As long as the SEC is focusing on the word "reverse," perhaps it might focus on another "reverse"-related investor concern: the reverse stock split. The SEC has a long list of Investor Alerts, ranging from affinity fraud to government impersonators, and yet it doesn't include this really odious investor rip-off. Reverse splits artificially boost share prices, which is never a good thing. It should be outlawed, or at least warned against. The most recent subject of a reverse split was Citigroup (C), which carried out a 1-for-10 split in May, and the stock tumbled thereafter -- as reverse-splitted stocks have been known to do. But don't hold your breath on the SEC issuing an Investor Bulletin on Reverse Stock Splits. You can bet that the SEC's fine staff isn't going to tee off a politically powerful potential employer like Citi.

Naked-Shorting 'Victims.' Naked-shorting has been a favorite whine theme of inept CEOs and outright scammers since the 1980s and earlier. It's currently a favorite of Overstock.com (OSTK) CEO Patrick Byrne, who is crying about naked-shorting when he isn't restating his financial statements, fending off a consumer-fraud lawsuit by California law enforcement, and posting comments to magazines that mention him in passing.

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