It is my understanding that shares of stock held in IRA's, 401ks, and other tax deferred or retirement accounts (including mutual fund shares and/or variable annuities) cannot be borrowed for the use of "shorting" the stock.
Is that in fact a true statement?
It is my guess that the majority of shares traded on Wall Street reside in these types of accounts - don't know this for sure though.
Question: Would it be illegal for hedge funds or Wall Street firms trading in their own accounts to "borrow" these same shares from these custodial accounts that they hold for the purposes of making short sales ?
Does anyone know for a fact that this practice is going on now or has gone on in the past?
Since stock can only be sold short in a margin account - the average investor does not have the ability to take advantage of negative moves in the market inside a so-called retirement account. By definition these shares, I presume are always long - so in the case of retirement accounts one can only be considered long, while the pros get to play both the long and short game.
If the short players have access to these shares, either directly or indirectly, then it would appear to be a very un-balanced system and I presume totally illegal.