1. Should short selling be outlawed?
2. Should naked short selling be outlawed?
3. How would you describe the ethical cultures at Goldman Sachs and Merrill Lynch with respect to failed trades?
4. Short of wholesale firings, fines and jail terms, can you suggest ways that the ethical cultures at Goldman Sachs and Merrill Lynch could be corrected?
Short selling occurs when a seller borrows shares from a brokerage house and then sells those shares. At a later date the seller buys the shares and delivers them to the brokerage house. If the price falls during the shorting period, then the short seller makes a profit and generates a loss if the stock price rises. In theory, short selling is supposed to be done when the seller has made arrangements to deliver shares in order that the total shares sold should not exceed the number of borrowable shares.