Subject: File No. S7-12-06
From: Gilbert M. Erskine

August 19, 2006

Thank you for opportunity to express my views on the SEC and Reg SHO.

I think, first of all, that all of the SEC Commissioners and Staff should be required to take and pass a test on ehtics, administered by any accredited university in the US. And, second, apply this new? learning to Section 17-A of the Securities Exchange Act of 1934, and especially to Section 9 'Prohibition Against Manipulation of Security Prices.'

The avalanche of evidence of multiple examples of fleecing the ordinary investory by naked short selling is clear to everyone except a befuddled SEC. You guys can't see the elephant in the room. You guys are a joke.

I have been accumulating shares of Novastar Financial NFI since April'03 and note that it has been on Reg SHO list, except for two brief interludes, since its inception in January'05. This company, with superb management, has a daily averge trading volume of under 1 million shares, and it is nearly impossible that the Fail-To-Deliver trades are all due to 'accidents'. Yet appeals and complaints to the SEC are not properly answered. In your incompetence you act like paralyzed deer caught in headlights. You do nothing.

You should not need anyone to tell you what the solution is on Reg SHO: stop the ability to counterfeit shares, assess penalties for continuous Fail-To-Deliver trades, require transparancy and disclosure from the DTCC on short sales, get rid of the Grandfather Clause, disallow naked short selling by option market makers, never allow a stock to be merely 'located' on short sales, but actually borrowed before the short sale is made.

The growing public perception of the SEC as an agency with an agenda of protecting the criminals on Wall Street is damaging to the US market processes. You now have the chance to change this perception, and I hope and pray you will do so.

Thank you... GILBERT M. ERSKINE