Subject: File No. S7-12-06
From: Concerned Citizen

September 16, 2006

September 15, 2006

Ms. Nancy Morris
Washington DC 20549-9303

Re: Release No. 34-54154 File No. S7-12-06

Ms. Morris:

This letter is in response to another comment letter posted on 9/14/2006 by Mr. John I. Fitzgerald, who is a compliance officer with Leerink Swann and Co. in Boston.

Mr. Fitzgerald suggests that maintaining a mandatory close-out after the 13 day period for restricted securities caused by a failure on the part of someone other than the seller is not getting at the problems intended by the Commission in adopting Regulation SHO.

He describes a possible situation where a seller wants to sell a restricted security but is stymied by an issuer, who has the sole discretion to remove the trading restriction legend, making it very difficult to settle the trade on time.

I sympathize with Mr. Fitzgerald, but an exception to the close-out rule is not the answer to his issue.

In his example, the sale of the securities is cleared, but its not settled, for whatever reason. But he implies that getting the issuer to lift restrictions is somehow part of the sale transaction when clearly its not. Exceptions to settling trades on time should not be made for reasons that have nothing to do with the transaction. Getting the issuer to lift restrictions is something that should be completed before any sale is even attempted.

Beyond Mr. Fitzgeralds examples, exceptions are what got us into the mess we in now. It is exceptions to the closeout requirement that are the root cause of all FTDs. For example, rules that allow only a locate of securities rather than a pre-borrow. Currently, the rules dont have parity for all parties they emphasize quick clearance but do not take care of the parties to which securities are to be delivered. And obviously, the larger dilutive effect on other shareholders is immeasurable but real.

Naked shorts, like Mr. Fitzgerald, are asking for exceptions in order to block the natural economic discipline they would otherwise bear by having to cover at prices that arent favorable.

Settle the trades, SEC.

Concerned Citizen