Subject: File No. S7-12-06
From: Peter Michaelson
Affiliation: individual investor

September 19, 2006

Dear Sirs and Madams:

I am in the minority on this issue. I am an individual investor with nearly 10 years experience selling short low cap "penny" stocks.

I believe that shortselling of these stocks is much too highly restricted as things stand currently because (1) It is already very, very difficult to borrow these stocks, (2) The margin requirement of $2.50 per share makes it uneconomic to short very low priced stocks (3) shortsellers are subject to random buyins at any time.

I believe that shortsellers play an important role in exposing the continual river of fraud in the penny stock markets. Absent the economic incentive to so expose and inform the public, the hundreds of frauds will only increase in number and severity.

The SEC enfocement has insufficient resources to prevent these hundreds of frauds. A very small percentage of them are ever stopped. This pump and dump crime pays well and is repeated by the same white collar criminals over and over again.

The movement to prevent shortselling is generated mainly by these same pump and dump artists, for whom shortsellers and the light they shine are their biggest risks.

Before making further restrictions, please present to the public the facts on harm caused by shortsellers. I see extremely little of this information that is factual in nature.

My opinion, humbly presented. Thank you.

Peter Michaelson