April 30, 2008
Ms. Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F. Street, NE
Washington, DC 20549-1090
RE: Release Nos. 34-57511 File No. S7-08-08 – Naked Short Selling Anti-Fraud Rule
Dear Ms. Morris,
I'm pleased to see Chairman Cox speaking out about Naked short selling and stating that it is a true problem. His statement that victims of this practice have a good reason to be to be angry, stands in stark contrast to former Committee member Nazareth's statement that "it was only certain shareholders whining because their stock didn't go up". As I witness the apparent paradigm shift in this regard, however, I cannot help asking why the SEC is dragging it's feet, and allowing numerous, protracted comment periods to address what has publicly been acknowledged as a serious problem?
A grandfather clause was quietly put forth with absolutely no comments solicited from the public. Why was that? I remember reading that it was implemented to mitigate the volatility that was expected (short squeezes) as large failure to deliver positions were covered. Who was responsible for allowing these positions to grow so large and for so long? The clause has since been rescinded, but where is the transparency, the disinfectant of sunlight that is needed to prevent it from happening again.
Why is the SEC seeking to issue more loophole laden rules when the rules already in existence to remedy this problem are not being enforced? Where are the consequences to serve as a deterrent to this crime? There are no enforcement teeth to ensure any adherence to the existing rules. As long as the SEC continues to allow violators to settle with a paltry fine and no admission of guilt or wrongdoing, there will be no future deterrence to this illegal behavior.
I would urge the SEC to stop dragging their feet, force the fails to be covered in T+3 as written, and grow some enforcement teeth to ensure compliance. If it will not, or worse, cannot do the job that it was established to do then it should be replaced with something that will.
I can assure you that a growing and very vocal group of citizen investors will inundate the Congress with demands to end the SEC's seeming collusion with Wall Street. Eliminate all naked short selling now