Subject: File No. 4-590
From: Douglas A Eayrs, CFA

September 30, 2009


One of the original reasons capital markets developed, was the need for a growing businesses to obtain additional capital from new investors to finance growth.

Since the 1930s, the SEC has been charged with primary regulation of both the financing of initial public offerings and follow-on public and private offerings, and in its regulation of after-market trading activity.

I believe U.S. capital formation has been negatively impacted by short-selling activities including illegal "naked" short-sales, fails-to-deliver, elimination of the uptick rule, and other activity such as so-called coordinated "bear raids" among short-sellers specifically targeting smaller US growth companies.

I believe the SEC's failure to regulate short-sellers and Brokers who have facilitated their activity, has contributed to an inability of the U.S. capital markets to carry out one of its most basic functions, to effectively serve as a "CAPITAL RAISING" medium for many emerging U.S. companies and businesses.

As an example, I believe short-sellers have successfully targeted many emerging companies "running low on cash" or within their early history of trading as a public company, so as to force these companies to undertake highly dilutive follow-on financings. This activity enabled the short-sellers to profit both from the initial stock price decline, and then their participation in the subsequent highly dilutive financing at a lower stock price. This is illegal. The SEC has successfully prosecuted a few of these cases, but has largely failed to regulate and prosecute this activity for many years.

In the U.S., most new jobs are created by growing businesses and capital formation.

The failure of the U.S. capital markets to effectively raise new capital for growing companies has cost the U.S. economic growth, new products and services, thousands and thousands of new jobs, plus many more taxpaying businesses and workers.

Today, only a few very large companies can even complete an initial public financing in the U.S. capital markets. Venture capitalists and entrepeneurs tell me that "a successful IPO" is not even in the business plan of most U.S. growth companies any longer. Today, the only realistic exit for most U.S. growth companies is an MA transaction to a large industry player.

I believe that poor regulation of short-sellers and their enabling Broker-Dealers has contributed in part, to the significant decline in U.S. capital formation and the inability of most U.S. growth companies to raise capital in the U.S. capital markets via public offerings.

In fact, many U.S. growth companies now consider their initial listing in London or Toronto or other foreign exchanges due to the failure of U.S. capital markets to successfully execute public offerings and fund emerging companies.

I ask the SEC to take into consideration how its policies and regulations with regard to short-selling activities contributes to the overall efficient U.S. capital formation for new US growth companies.

A primary SEC policy goal should be to encourage the U.S. capital markets to again effectively serve as efficient medium to create capital formation to finance growing U.S. companies and businesses.