Initiated Measure 9 (Wall: broker, attorney, university)

[jeremyf-rcj]

Since we've talked about a few of the ballot measures on this forum, I thought I would introduce the conversation on Initiated Measure 9 -- the "South Dakota Small Investors Protection Act."

I'm writing an article about this for the RC Journal. Its a complex issue, especially because few South Dakotans deal with short selling in the stock market, or know the difference between short selling, naked short selling or abusive short selling.

I don't want to take a position on the measure -- I'm a reporter covering this, after all -- But I would be interested in your opinions.

Here's some research, if you don't know about I.M. 9:

1) Ballotopedia article about it, which includes the attorney general's description of I.M. 9.
2) New reports about it from KELO TV, the Associated Press (http://www.fool.com/news/associated-press/2007/11/28/sd-targets-illegal-short-selling.aspx - broken link) and Financial Planning (excellent impact piece).
3) Bob Mercer's solidly-reported, in-depth work (.PDF) on the groups pushing the measure and where they get their money -- see pages 9-17.
4) Investopedia piece detailing short selling, naked short selling and abusive naked short selling.

[Jammie]

Oh gosh, this is WAY over my head.

[MJ1986]

Jeremy, I wish I could help with an opinion... But as Jammie said, this is new stuff to me. I'd have to research it more, and read deeper into it before I form an opinion. Good luck with the article though!!

[Efortysix]

I need to understand this better. How in the heck are we to control short selling as a state for stocks that trade on Wallstreet? Is this going to mean that only people in south dakota, with their online broker (E*Trade, Scottrade, Ameritrade) it will be illegal for them to short sell but the rest of the country can do it? There's no way to control or enforce this unless you're a south dakotan dealing directly with a south dakotan company and broker?

[jeremyf-rcj]

Originally Posted by Efortysix

I need to understand this better. How in the heck are we to control short selling as a state for stocks that trade on Wallstreet? Is this going to mean that only people in south dakota, with their online broker (E*Trade, Scottrade, Ameritrade) it will be illegal for them to short sell but the rest of the country can do it? There's no way to control or enforce this unless you're a south dakotan dealing directly with a south dakotan company and broker?

If any of the national firms are registered in South Dakota, they would be covered by this law as well.

[BusySocialWorker]

The thing that makes me go hmmmmm on a lot of these is this:

If you go to the sample ballot on line and read the Attorney General Explanation: most of the proposed issues state:

"If adopted measure 9 will likely be challenged in court and may be declared to be preempted by federal law and US Constitution"....

Many others also add in "If so the state may be required to pay attorney fees and costs"

For example IM 10 and IM 11 - why would we try to pass something that will cost us more in legal battles and that would more then likely be over-ruled by the constitution anyway? I just don't get it.... seems like throwing away money to me...

[jeremyf-rcj]

The opponents of IM9 say that's a big part of the issue -- it will likely go to court and the state will have to defend it.

The supporters say that's a red herring and the state attorney general doesn't have to defend the law unless he wants to.

[#1Scholar]

I am very confused by the whole matter, I will need some time to ponder through the emersable flow of information. I will be sure to share what I have concluded from my recent research in my next reply. Until then keep studying you brilliant scholars, remember you will always be number 1 in my book!