I was watching some commentary on BNN the other day regarding short selling, following the recent changes to short selling. The investment fund manager that was being interviewed felt that naked short selling was quite common, and was glad of the changes. He said one specific thing though that I didn't fully understand - apparently his firm recently purchased high yielding preferred shares in at least one international financial institution, and he said that settlement failed. My question is as follows - if this were to happen, what exactly happens next, given that he has purchased shares in the market at "x" price? I assume that cash paid for the shares would be refunded to his account, given that nothing was delivered in return, essentially voiding the original purchase? Thanks!