Subject: File No. S7-12-06
From: Eric S.

April 5, 2007

Amazingly, with all this talk of violations referenced in the Pershing Bulletin below, never once was there mention of immediate guaranteed buy-ins at the cost and liability to the violator. Pershing is also only now talking about increased regulatory scrutiny despite SHO being in existence for over 2 years.

What is this reference to Trade Date plus 35 they talk about?

Topic: Update Information Relating to Regulation SHO (Short Sales)

Effective Date: March 30, 2007

Bulletin: 13-2007
(Update to Pershing Bulletin 2004-71)

Due to increased regulatory scrutiny surrounding Regulation SHO, Pershing is modifying their order management systems, processes and policies to help Ryan Beck comply with this important regulation.

Short Sale Definition

A sale should be marked "short" whenever a client is selling securities that (1) the client does not own, (2)) where the client is net-short the securities, or (3) where the seller owns the securities but they are not held in the account in good form to effect delivery by trade date plus 35 days.

Effective the end of business on Friday March 30, 2007, it will be mandatory that all trade entries for short sale orders indicate the borrow/locate information. While this is presently mandatory for orders submitted to Pershing for execution, it will also be mandatory for all trades processed at Pershing, regardless whether the order was executed by Pershing.

If applicable, enter S followed by the four-letter business acronym of the firm supplying the locate information in the borrow/locate field of Pershings order entry systems to satisfy this requirement, such as SMLCO (Merrill Lynch).

If the client supplied the locate information, the FC enters CUST along with the name of the firm, such as CUST MLCO (Merrill Lynch).

Regulation SHO Enforcement

1. Regulation SHO Violations

If activity in a Ryan Beck account is found to have violated a Regulation SHO rule, Pershing will provide notification to Ryan Beck.

If activity in a Ryan Beck account violates a Regulation SHO rule twice within a 360-calendar day time frame, Pershing will provide Ryan Beck with a second notification.

If activity in an account or group of accounts linked to the same individual or entity violates a combination of any three Regulation SHO rules in a 360-calendar day time frame, Pershing will impose a mandatory 90-calendar day restriction for any short sale or long sale (when the securities are held at Pershing), followed by a probationary 12-month period for the account(s). Pershing will notify Ryan Beck of the third violation as soon as possible.

If during the probationary period, the account(s) is found to have violated another Regulation SHO rule, Pershing will place permanent restrictions on the account(s).

2. Threshold Securities Violations

If activity in an account or group of accounts related to the same individual or entity is found to have violated a Regulation SHO rule in a threshold security, Pershing will automatically restrict the account(s) and provide notification to Ryan Beck.

3. Locate Verification Exception List

Pershing will periodically verify short sale locate information, when the information is obtained away from Pershing. If Pershing is unable to verify the locate information for an account three times in a 360-calendar day time frame, Pershing shall restrict the account from obtaining locate information away from Pershing.

Locate Violations:

1. Long Sale Violation

A sale is entered long, the stock is not in the account and the stock is not delivered by settlement date.

2. Short Sale Violation a sale is entered as short and any of the following occur:

The locate was not obtained

The short sale was greater than the locate amount

The locate was obtained away and Pershing was not able to verify it

The exemption used is not valid; such as claiming a market maker exemption and Ryan Beck is either not a market maker or is not acting in the capacity of a market maker

The short sale is in a threshold security where the short increases Ryan Becks net short position and Ryan Beck did not pre-borrow the stock

Any action not listed above that is deemed to be contrary to Regulation SHO (either a current regulation or any future amendment) will be treated as a violation for monitoring purposes.