April 26, 2007
Dear SEC,
The thirty (30) day comment window appears to be up on this Proposed Rule. The SEC asked many questions of the Securities Industry and Options Market Makers yet very few, if any, stepped up to the plate to answer your questions in the proposed rules.
I suggest the reason for this absence of commentary is they do not care about procedural rules and the sunshine laws associated with the rule-making process. The "grandfather" clause came about through a back-room deal and I suspect the Industry expects something similar this time around.
As an individual investor I request transparency, a fair and open rule-making process and enforcement of the rules from the SEC. Since the Industry and the Option Market Makers have decided to thumb their noses at the comment period in the rule-making process the SEC must decide to do what is right.
TRANSPARENCY - THE SEC MUST COMPILE AGGREGATE DATA FOR ANALYSIS. THE CURRENT VOID IN DISCLOSURE IS UNACCEPTABLE. ALL PIECES OF THE PUZZLE ARE REQUIRED FOR A COMPLETE AND ACCURATE ASSESSMENT.
1a. Transparency - All FTD's along with the monetary value of same must be reported for all securities on a monthly basis. It is astonishing that the SEC does not monitor the monetary value of these fails and has refused to go on record as a regulatory body in any form with an aggregate monetary value. That is scary. As I stated in my previous comments the fail data without a monetary component is useless.
1b. Transparency - all loopholes in the short sale reporting rules must be closed. The SEC doesn't have a clue how many shares are actually short (legit or naked) in the market. That is a travesty.
1c Transparency - Mutual Funds must improve their disclosure on Securities lending. The investing public doesn't know a damn thing about this sleight of hand.
1d Transparency - Form 13F must require short positions to be reported.
GRANDFATHER CLAUSE
1. This absurd back-room handout to an Industry flush with profits is a disgrace. It must be rescinded. The SEC appears to be incapable of understanding that the grandfather clause is a big slush fund for the Industry. It is a license to FTD on all securities, liquid or illiquid, up to 1.5% of outstanding. Has the SEC ever wondered why very liquid securities persist on the data list from the DTCC below the threshold? Big money is being siphoned in a game of musical shares below the threshold.
SUNSHINE
1. No more back-room deals. If the Industry can not make their case with verifiable data in public comment period then the Industry does not have a case.
The SEC works for all investors not just the elite few. It's time to level the playing field and reverse the loopholes and the lack of transparency the SEC has granted the Industry. Either close the loopholes enabling short sales without a borrow or open them up to all investors.
Thank you,
Thomas Reilly