SEC Inspector General Considering Audit, Investigation on Naked Shorting SEC Inspector General Considering Audit, Investigation on Naked Shorting Posted April 07, 2008 10:15AM PST The inspector general of the Securities and Exchange Commission is considering an audit or investigations relating to the SEC's past handling of complaints involving naked short selling of stock. Inspector General David Kotz met March 26 with David Patch, founder of the web site www.investigatethesec.com and a well-known advocate against naked short selling. Kotz said April 7 that he is considering what action is warranted on the issue. Possibilities include an audit or investigations. An audit is a broad look at the SEC's practices in a particular area, while investigations focus on specific allegations of wrongdoing by SEC staff. "We're looking at the information Mr. Patch provided us," Kotz said. Naked short selling "is definitely a matter of great concern to a lot of people." An official from the Government Accountability Office also attended the meeting with Kotz and his staff, Patch said. GAO officials couldn't immediately be reached to comment. Naked short selling is the practice of selling a stock short without borrowing or delivering the shares sold. Patch and others argue that the practice has diluted the values of some stocks, and particularly of small cap companies, by putting thousands of "phantom shares" into circulation. Critics of the SEC say that it hasn't aggressively moved against naked short sellers. Read this story and more at DealFlowMedia.com I had a hand in this, I'm proud to say. They must have filled a room at the SEC filled with letters they ignored. There' s a new sheriff in town. And he's not getting paid by the Connecticut crowd.