Subject: File No. S7-12-06
From: Anonymous American Investor

September 19, 2006

September 18, 2006

The Honorable Christopher Cox, Chairman
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549-2001

Re: File No. S7-12-06
Proposed Amendments to Regulation SHO

Dear Chairman Cox,

Thank you for providing this opportunity to comment on proposed amendments to Regulation SHO under the Securities Exchange Act of 1934. I understand the proposed amendments are intended to further reduce the number of persistent fails to deliver in certain equity securities, by eliminating the grandfather provision and narrowing the options market maker exception.

Before I expound on this proposed rule and related matters, I want to state my position that the grandfather provision should be eliminated from Regulation SHO. The options market maker exception, and any other exceptions, should be eliminated wherever necessary for the protection of individual investors. We should not be creating artificial liquidity in any security, by creating an artificial supply of shares that place downward pressure on the bona fide security value.

Chairman Cox, in the opinion of thousands of individual investors, you inherited an organization that is captured by the very same Wall Street institutions the SEC is charged with regulating. You inherited an executive staff that frames opponents of so-called naked short selling, the counterfeiting of commercial securities, as just mad because they want their stock prices to go up. To borrow a phrase from Former FBI Agent Robert Maheu, "Tough assignments are not solved by wishful thinking, but rather by tough action". Chairman Cox, you have a tough assignment on your shoulders, and it is going to require tough action on your part to solve it. In my opinion, with respect to persistent, strategic and abusive naked short selling, you are looking at a multibillion dollar organized crime operation that is going to take all the resolve you can muster to eliminate it. Fortunately, you are not alone.

I am an individual investor living in the United States of America. While I am not representing any group of investors, my thoughts and comments on this matter are representative of thousands of other individual investors across America and Canada. I know this because I have communicated with many of them on a daily basis, over a period of several years. This opportunity to comment is one of the few public opportunities that individual investors have to communicate our expectations to the Securities and Exchange Commission. Our elected officials have repeatedly demonstrated that they are captured by lobbyists, and cater exclusively to special interest groups. They have clearly forgotten what this county was founded upon, or perhaps they have not forgotten and have chosen instead to sell their souls at the expense of their constituents. The caliber of comments to the Commission on this proposed rule is outstanding. I am proud to submit my comments on this matter, on the same page of so many honorable and respectable names that I recognize.

Individual investors have met with, and wrote thousands of letters to, the US Senate Banking committee. After no action on the matter of naked short selling, and upon concluding that an inherent conflict of interest is present within the Banking Committee, we have recently focused our efforts toward communication with the US Senate Finance Committee and the Committee on the Judiciary. I expect the campaign contributions from the broker dealer and the hedge fund communities, toward those committee members, will increase exponentially over the next several years. We appear to be gaining some traction on this issue of so-called naked short selling though. Naked short selling is simply the counterfeiting of commercial securities, at the expense of many, for the enrichment of a few.

What we expect from the Securities and Exchange Commission is also simple. We expect to be treated with honesty and integrity, and we expect our securities regulators will perform in the utmost ethical manner. When we work everyday in an ethical and law-abiding manner, to support our families, we expect our elected and appointed officials to be working diligently in the same manner at their respective positions. Any one of us could game the system, and commit fraud to increase our income, but we do not. Only the criminals in our society do that. We expect honesty and integrity from all those we elect to office, and those appointed by them. When we look at state and federal taxation on our pay stubs, we expect our contribution is providing important services to our citizens, one of which is the protection of our retirement and discretionary investment capital from fraudulent manipulation of any kind. Theft of investment capital from any citizen is simply wrong, and theft of investment and retirement capital from the elderly of this great nation is particularly egregious. Yet it continues. Chairman Cox, you have the exclusive authority to stop it, today.

We know existing and future securities laws are irrelevant where there is little or no enforcement. We expect securities laws to be enforced, and criminals to be prosecuted. We know it is easy for criminals to "game the system" and steal our investment capital. It does not take a genius to figure out how to steal money, from any system. When they do, it should always be met with swift enforcement. It should never be met with a comparatively small fine versus the amount stolen. It should never be met with a deal to avoid criminal prosecution by increasing the monetary penalty. This is the present state of enforcement against securities fraudsters. They pay fines with our stolen capital, and then effectively write it down as a business expense. Chairman Cox, you now have the opportunity to correct this vicious cycle that has literally spun out of control. This vicious cycle presents systemic risk to our national market system, by any reasonable measure.

SEC Regulation 17A(a)(1)(A) states, The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.

Individual investors are becoming fully aware of the persistent fraud that plagues our securities markets, particularly with respect to naked short selling.

We are aware of the multitude of securities lending lawsuits against the major prime brokers,

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We see many of these same prime brokers receiving fines for acts that we perceive to be criminal, repeatedly. These are simply business expenses for those perpetual violators of our trust,

We are aware of the problems with shareholder proxy over-voting related to issuance of electronic counterfeit securities, markers in our brokerage accounts for shares we paid for that simply do not exist anywhere in physical form.

Chairman Cox, we see members of your enforcement staff testing your resolve to stand behind them when they subpoena conflicted journalists.

Showing his disrespect toward your most courageous, ethical and honorable staff members, we watched Jim Cramer write BULL on his SEC subpoena, on a conflicted but well known cable television program, providing us with visual evidence of what we already knew someone needs to bring honor and respect back to the SEC,

My fellow investors stood behind your courageous staffs decision to subpoena suspect journalists, journalists that many suspect of colluding with short sellers to drive down stock prices. Jim Cramers network polled us with a question, Did the SEC overstep its authority by subpoenaing business journalists? The network had no idea that we have clearly had enough media manipulation of this stock market. In just 24 hours, 2348 citizens voted, and 89% of us backed your staffs decision to issue those subpoenas,

We watched in utter disappointment when you halted the efforts of your staffs honorable intentions, then wrote a policy that embarrassed that same staff and their commendable subpoena actions,

We watched as former SEC attorney Gary Aguirre leveled charges against the SEC, charges that individual investors have been claiming for years. This time, we had a champion on our side, FOIA.pdf

Every few months, we get a lesson from DTCC First Deputy General Counsel Larry Thompson. My fellow investors are not accepting the word of this organization that is supposed to clear our trades in their stock borrow program, but refuses to offer any transparency whatsoever. Furthermore, we are not impressed that the DTCC Board of Directors is populated with executives from the same market participants that we scrutinize for naked short selling. It seems the proverbial fox is guarding the hen-house here,

We watched our champion, Dr. Patrick Byrne of, give us a first hand account of so-called naked short selling, the counterfeiting of commercial securities. A CEO purchases two million dollars of stock in his own company, and he cannot take delivery of this stock in certificate form. Thank you for the lesson Dr. Byrne. We can never repay you for all you have done to champion the exposure of this egregious crime. We are standing behind you, and we will always be there for you when you need us,

We followed the campaign to eliminate stock certificates from our securities markets, when curiously they are the only form of stock ownership that we can trust in this market of counterfeit securities. We do not like the idea of removing stock certificates from the equation. Forgive us if we are not trusting at this stage of our journey,

We took another lesson from Dr. Byrne, as he spent countless hours preparing a presentation that describes failures to deliver in the securities market. We wanted to know why we need someone like Dr. Byrne to stand up for us, on his own time, when our tax dollars are paying for thousands of lawyers and criminal prosecutors to do the same, on our dime,

We heard Senator Hatch is fearful for Dr. Byrne's life, and that he would move the earth to get whoever did it, should Dr. Byrne meet with an untimely end - hit by a car, plane goes down, chokes on a chicken bone, takes two slugs to the back of the head in a "suicide."

That is pretty serious stuff. When the Ranking Republican on the Select Committee on Intelligence is telling Patrick that he is worried about him remaining alive, and wants to let the bad guys know that they will have Hatch to contend with if they decide to off him,

We watched as Dr. Byrnes, Biovail, and Fairfax Financial Holdings sued their respective defendants alleging an entirely separate, but likely related, form of stock manipulation via tainted research reports. We did some research and found similar concerns in 1991, and we wondered why our representatives would not cleanse this market of such perpetual corruption,

We looked at another threshold security, Taser. The maker of one the most life saving tools that law enforcement has ever had at their disposal. Although it spends hundreds of days sitting on the NASDAQ threshold security list, since the commencement of Regulation SHO in January 2005, we didnt hear a word from Tasers CEO. We found there is only one large-cap CEO willing to stand up against the criminals that raid our portfolios every day, Patrick Byrne. Dr. Byrne knows the consequences of his efforts to cleanse this market of perpetual corruption, but he continues this battle with the determination and skill of a well-trained army. We watched as Taser was placed under investigation by the SEC on a TIP. We watched as the investigation closed a year later, with no charges. We looked at Tasers decimated stock price and how the entire process looked all too familiar. We were curious why the SEC would receive a TIP on Taser, and the stock would fall off the charts, beginning on day-one of the newly implemented Regulation SHO,

We witnessed the State of Utah take a leadership role when they passed Senate Bill 3004, imposing penalties on and exposing naked short sellers. We sent messages to every Utah Senator, and the Governor, telling them how proud we were of them for listening to us and for standing up for what is right and just. We saw the Utah law challenged, and its implementation delayed by the same industry lobby groups that we believe have captured the SEC and our elected officials,

Out of a collection of what we believe to be several hundred criminal stock manipulators, we saw the SEC act on a handful,

We saw countries around the world becoming aware of the manipulative short selling practices in the United States markets. Once the crown jewel of the financial markets, we continue to see deteriorating interest in our markets by public companies. In a sense, one could theorize, the word is out on the street about the corruption infested US market system,

Mr. Chairman, we know your job is difficult. We recently heard from former Chairman Arthur Levitt about the incredible pressures of your position. In an interview, he is quoted And when all else failed, lobbyists would cash in their chips with members of House and Senate committees to threaten the SEC - an independent regulatory agency - with budget cuts to get what they wanted. Regrettably, I occasionally found myself succumbing to this immense pressure in order to save the commission.

We learned three out of four U.S. investors (76%) say someone who naked shorts a stock should face civil (8%) or criminal penalties (9%) or both (59%). By the same margin (76%), investors believe such penalties should be about as (65%) or more (11%) severe than those for fraud and counterfeiting, according to a recent survey commissioned by Working Americans for an Open Economy, conducted online by Harris Interactive® among 1,243 investors nationwide,

We saw Refco implode, perhaps the best show since the LTCM collapse, but the broadcast media was curiously silent on the issue. We appreciated the Time Magazine story on Refco and naked short selling, but there was not a regulator, a law enforcement officer, or politician in the land that would lift the lid on the full scope of this crime, still.

We waited patiently as Dateline NBC released their report on naked short selling, after eighteen months of research. We were disappointed when they finally aired it, eight minutes in its final form. The network must have been proud. Edited down, diluted, it was nearly useless, except for the honorable CEO of a small company we met. We found another champion of honesty and integrity. Rodney Young, CEO of Eagletech, a small business decimated by criminal naked short sellers. We think Mr. Young is a true American hero, and we followed him to Washington DC on February 13 of this year. We listened as he testified in front of your Commissioners on the revocation of his companys securities. We knew he was challenging the constitutionality of the Regulation SHO grandfather provision and we were behind him 100%. We looked at your empty chair throughout the proceeding Chairman Cox. I wish you could have been there to listen to this honorable man in person,

Still, we wondered what happened to Datelines eighteen months of interviews and preparation for the show that was to expose naked short selling to all Americans. We looked to the board of directors at NBC parent General Electric because we wondered who would accept such a lousy return on their eighteen-month investment. We found Chase Manhattan, J.P. Morgan Co, Citicorp, Morgan Guaranty Trust, State Street Bank and Trust, Banco Nacional de Mexico, and The New York Stock Exchange. These are all smart people. We figured NBC must be a strategic loss leader for the parent company. In our opinion, Dateline was another strategic failure to deliver.

We read Dr. Leslie Bonnies study on Strategic Delivery Failures in U.S. Equity Markets, the Wharton-UNC study titled Failure is an option, the Finnerty Study on short selling, and the Advanced Small Business Alliance position paper on naked short selling.

We watched a former DTCC board member submit to a public grilling on naked short selling during a NJ State hearing for his treasurer post,

When asked if he ever participated in naked short selling at one of his former employers, there was a four-second pause before the reply came.

Chairman Cox, individual investors have sought relief from the manipulative practices of illegal naked short selling predating the 1999 SEC Concept Release No. 34-42037 File No. S7-24-99 on Short Sales. Our research indicates the resultant Regulation SHO to be an utter failure with respect to investor protections and categorically fails to curtail manipulative naked short selling practices throughout the industry. We find it appalling to find dozens of securities listed on the Regulation SHO Threshold lists, some for more than a year, with no relief from regulatory agencies sworn to protect investors against such manipulation.

I respectfully request that you commence enforcement action on criminal naked short sellers under the following existing laws and regulations, to name a few:

RICO Act under 18 U.S.C. 1961(1)
Securities Act of 1934 Section 20 -- Liabilities of Controlling
Securities Act of 1933 Section 17 -- Fraudulent Interstate Transactions
Securities Act of 1934 Section 17A - National System for Clearance
Securities Exchange Act of 1934 Section 8 -- Restrictions on Borrowing
Securities Exchange Act of 1934 Rule 15c3-3 -- Customer Protection
Securities Exchange Act of 1934 Rule 15c6-1 -- Settlement Cycle
Title 18—Crimes and Criminal Procedure
Sherman Antitrust Act
The Martin Act

When I began writing this letter, I considered a line-by-line response to all of the Commissions requests for comments. I read the entire proposal, including this statement, To allow market participants sufficient time to comply with the new close-out requirements, the proposals include a 35 settlement day phase-in period following the effective date of the amendment. With all due respect Mr. Chairman, market participants are not the entity we are concerned with here. Market participants are handling our assets. We are the owners of the capital, and we are the owners of the securities. We are concerned with the shareholders of public companies like that have been watching their investment appear on the NASDAQ threshold security list for eighteen months. We are concerned about retirement fund participants and mutual fund holders of manipulated securities like, and Taser. The SEC is far too concerned with pleasing self regulatory organizations that are no more capable of regulating themselves than a kid in a candy store. Trades should settle at T+3, not T+300, period. The multitude of questions the Commission seeks comments on are simply not germane to the issue at hand. The problem and the solution have been identified. Stop the counterfeiting of commercial securities, protect investors, and settle the trades.

Chairman Cox, I recognize your task to rid our markets of manipulative naked short selling is no simple matter. I, along with thousands of other individual investors have listened to you since your appointment to the Commission. We are encouraged by your apparent receptiveness to cleaning up our corrupt markets. Although the political pressure must be incredible, and the influence from the financial institutions you govern must seem insurmountable, we are counting on you to be the first SEC Chairman in decades to do something we can be proud of.

In closing, I would like to revisit that statement by Former FBI Agent Robert Maheu, "Tough assignments are not solved by wishful thinking, but rather by tough action".

Be a Chairman for the people, for the millions of American citizens that want to trust our capital markets with our retirement and discretionary investment capital. While the challenge is great, you must realize that you are the only one that has the authority to correct this systemic risk that naked short selling represents in our markets. We are counting on you to do the right thing and we are more than ready and willing to stand behind you. Just say the word and we will be there. We only ask that you lead the way, with an unwavering commitment to prosecute criminals, and bring integrity back to our securities markets.


Anonymous American Investor
Main Street
Any town, USA