RE: shortUSA2seller of phantom shares pays divi, well he's the bad guy right???
Yeah, he's the bad guy selling shares he doesn't own and hasn't even borrowed. I don't know the answer to your other questions with any certainty so I'll just keep my trap shut. A significant penalty for failure to deliver that is automatically applied would be a start but I think the ultimate fix is what Chairman Cox has mentioned and that is to simply eliminate the "reasonable grounds" loophole whereby one can sell shares they haven't borrowed so long as they have "reasonable grounds" to believe the shares can be borrowed in the future. This appears to me to be the root of the problem, eliminate that and I don't see how you can naked short a stock. As I've mentioned in an earlier post, there are some pretty powerful players who will fight to keep this loophole. I guess we'll find out who the SEC really works for in the near future. Will they act in the interest of 99% of the market's participants or will they favour the powerful 1% and spin it to look they've actually done something?