Subject: File No. S7-10-08
From: Dave Patch

May 8, 2008

May 8, 2008

Mr. Chairman,

Before this proposal gets too far into the comment period it may be helpful if the Securities and Exchange Commission could carefully define and bound the term beneficial owner. Unfortunately, with where we are today, the industry, the regulators, and the investing public all have slightly different interpretations of what defines a beneficial owner.

Case in point: Only a beneficial owner has the right to vote a proxy yet more proxy submissions are made than shares issued and outstanding by the public issuer. Since the SEC and SROs have failed to take enforcement action against such it could be interpreted that a beneficial owner is any investor who has a share identified in their account under book-entry.

Is this the definition you would like to be used in this public comment?

I ask this because this is clearly not the definition identified by the SROs when defining a beneficial owner.

Beneficial Owner: A person who benefits from ownership of a security or mutual fund. Shares or title may be held by a bank or broker for safety and convenience, or in "street name" to expedite transactions, but the real owner is the beneficial owner. (See street name .)

This definition located at implies that a title to an issued share is a pre-requisite to beneficial ownership.

Is this the definition you want used when responding to this proposal? If so, how does the SEC plan on addressing the difference between the use of the Proxy definition vs. the Regulatory definition when calculating US Beneficial ownership?

Clearly the difference between the two are in cases where shares have not yet settled but book entry settlement has been concluded or, in cases where stocks held by a beneficial owner are borrowed for use in a short sale transaction.

When a US investors shares are lent for a short sale to a non-US investor, where does the beneficial ownership lie? Will this qualify as US ownership or a foreign ownership?

Until such time as the SEC finally addresses this multi-decade debacle regarding settlement failure abuses the calculation of US Beneficial holders will remain inaccurate and inconsistent. Shares traded within the US can be over traded causing a trip of a threshold when in fact no such event occurs. Who then pays the burdens of such trading inefficiencies?

My point in this initial response is that I find it premature for the SEC to draft rules that associate anything having to do with an accurate count of beneficial ownership when this very same Commission has admitted that they have not yet resolved the proxy vote issues pertaining to over-voting of shareholders and has not yet resolved the issues pertaining to the inefficiencies in the trade settlement process.

A smart Commission would understand that these are representative of the inefficiencies and concerns that the members of Congress had when they drafted Section 17A of the Exchange Act of 1934 - requiring for the prompt and accurate settlement of trades.

Could the Commission possibly respond to the public as to when the proxy over-vote and settlement failure issues will be resolved such that beneficial owner counts can be considered a more reliable metric? If you prefer to check with SIFMA first before responding please do so. I am sure SIFMA will guide you in the direction our US member firms wish you to respond.