The answer The "Naked" Short Sale
Though the SEC granted short selling legal status in the 20th century and extended its franchise in the early 21st century, some short-selling practices remain legally questionable.
For example, in a naked short sale, the seller must "locate" shares to sell to avoid "selling shares that have not been affirmatively determined to exist." In the United States, broker-dealers are required to have reasonable grounds to believe that shares can be borrowed so they can be delivered on time before allowing such a short sale.
Executing a naked short runs the risk that they will not be able to deliver those shares to whomever the receiving party in the short sale.6 Another prohibited activity is to sell short and then fail to deliver shares at the time of settlement with the intent of driving down an asset’s price.7