March 26, 2008
Reading through a number of comment letters has led me to conclude that there is a lot of frustration and anger on the part of investors who bought highly speculative individual securities that have stopped trading, or which have no history of profitability, and have decreased signifcantly in price. It is interesting to note that allegations of illegal naked shorting persist even in the highly volatile market conditions currently being experienced. There also appears to be some lack of investor knowledge that coincides with what I understand is FINRA's attempt to place more emphasis on investor education.
But what really strikes as most important is that it appears that many of the commentators appear to have lost a significant amount of money that they could not afford to lose, and did not understand the risks involved in the investments they made. I suspect that for many of these commentators the investments they made in these securities were not suitable, even if the investments were unsolicited.
I'm sure that naked short selling abuses have taken place and will continue to take place and that regulators could do a better job in detecting it and in forcing broker-dealers to prevent it. But I think that an as-large, or even larger problem exists in that securities firms are allowing their customers, or encouraging them, to purchase such highly speculative securities, especially to the extent that these investor's losses result in these comment letters. Perhaps you should consider referring these letters to FINRA or the appropriate Commission department to review further.