Subject: File No. S7-08-08
From: Mark Kolesinsky

April 21, 2008

Dear Ms. Morris,

As a small individual investor I am deeply troubled at the lack of action on the part of the SEC to stop the abuses of naked short selling/failing to deliver in our capital markets. While the SEC has shown token interest in the subject, I dont feel the SEC is doing enough to stop the price manipulation of publicly traded companies via failing to deliver.

I do not feel the current proposal does enough to address strategic failures to deliver which has affected me personally and hundreds of companies currently and formerly on the REG SHO list. Federal law states that failing to deliver securities past the third day is prohibited. Companies have lingered on the REG SHO list for years without any enforcement. The proposed Naked Short Selling Anti-Fraud Rule states that deceiving brokers or dealers regarding the ability or intent to deliver stock on the scheduled settlement date is an offense. How will this stop strategic failures to deliver? The rule creates no disincentive for brokers and in fact, it may create an incentive for brokers to fail as you have shifted the onus off of them.

The Naked Short Selling Anti-Fraud Rule being proposed outlines that it is an offense to deceive brokers or dealers regarding the ability or intent to deliver stock on the scheduled settlement date. This rule is redundant as it is clear this is already an explicit violation of the anti-fraud provision of Rule 10b-5. The rule also seems to do nothing to protect the target company and its investors yet protect broker dealers. Quite frankly, the rule seems to be a proactive measure to shield broker dealers from future litigation once the public realizes the tremendous fraud you have allowed to take place.

If you want to clean up the failure to delivery problem, a reasonable person would start with the companies that have persisted on the REG SHO list for months and years yet there seems to be absolutely no enforcement. Not only are you not enforcing rules that have been in effect since the SEC was created but you are not even enforcing your own current rules such as REG SHO How can the SEC stand by and watch delivery failures continue in target companies for years and sit idle?

It is very apparent to me that the SEC has taken a stance to protect broker dealers/market participants at the detriment of issuers and individual investors. REG SHO, grandfathering of past fails, the market maker exemption and this tepid new proposal all show where the loyalty of the SEC lies and that is with Wall Street, not the investors or publicly traded companies you are tasked with protecting.

There seems to be no end in sight to strategic, abusive failing to deliver as the SEC seems unwilling to enact meaningful enforcement of existing laws or pass new rules to protect investors. There are current laws that you are not enforcing and proposing new rules that simply regurgitate existing laws will do nothing. To clean up the mess you have created the SEC needs to:

Require that all short sellers of threshold securities either
Have possession of the stock in question or
Have entered into a bona fide contract to borrow the stock in advance of the sale
Increase transparency with regard to short selling and settlement failures to reduce the clouds of suspicion that arise

Enforcement of existing laws is long overdue with regards to failing to deliver. To me there are only two explanations for your overt authorization of naked short selling as evidenced by the grandfathering of past fails, REG SHO list and market maker exemption: the commission is either inept or corrupt. As more and more trades fail, companies linger on the REG SHO list for years and bear raids are executed with impunity, the minimal amount of credibility the SEC still has will wither.


Mark Kolesinsky