April 11, 2009
Most Esteemed Commissioners and Madame Chairwoman:
I believe there is much abuse by both short sellers and long market participants which creates excessive volatility and strains the resources of the already undermanned enforcement staff. I thus, prefer the exchanges monitoring this activity themselves via trading curbs as are done on several foreign exchanges to include Russia, Japan, and India.
My proposal is simple:
1 day trading halt immediately put in place and not lifted until issuer is able to schedule an open conference call and/or issues an SEC compliant 8-K to explain why there was unusual share price movement with the following criteria:
7.5% max PUMP/DUMP in pps on issuers with market caps exceeding $50 BILLION
10% max P/D for issuers with market caps between $5 BILLION and $50 BILLION
12.5% P/D for between $500 MILLION and $5 BILLION market cap issuers
15% P/D for between $50 MILLION and $500 MILLION m/c issuers
17.5% P/D for between $5 MILLION and $50 MILLION m/c issuers
20% P/D limits on issuers with market caps below $5 MILLION
Curbs to kick in when the above is met as long as average daily trading volume is also exceeded. The above would be too onerous for 3rd tier boiler room/bucket shop market makers in micro-cap issuers to comply with on thinly traded issuers otherwise.
In addition, I am also proposing a moratorium on ANY kind of short selling for 2 years on newly taken public issuers. This would give them a chance to prove they're worthy of being publicly listed/traded as well as give them an opportunity to raise capital a few more times via SPO or PIPE. As we all know, short seller abuse with issuers like this is often the SPO/PIPE purchasers shorting ahead of yet another "dilution solution" capital raising event.
Banning short selling of any type for a period of 2 years gives original investors in the IPO a fighting chance and also permits insiders or venture capitalists to unload at a higher price if they decide that's what they wish to do. Often they're restricted from selling until the issuer has been publicly listed for 6 months or longer. No one bothers to read a prospectus to see what the restrictions are so this moratorium would be beneficial to IPO investors as well.
Reinstatement of the uptick rule, in my opinion, would not be as effective and would also create an additional burden upon the enforcement staff to assure it's being complied with.
Thank you all very much for permitting me to express my opinion(s) on this matter.