July 9, 2008
As a shareholder in a company that has appeared on the Regulation SHO threshold for a number of years and has been financially damaged as a result of proven failure to delivers it is important that certain amendments to Regulation SHO be implemented.
It is important that the proposed elimination of Regulation SHOs options market maker exception be implemented as soon as possible. The options market maker exception has been used extensively by brokers, et al. others to manipulate various securities and this exception must be eliminated immediately in order to demonstrate credibility to the agency and its rules.
Also, it is important that Reg SHOs grandfather provision be eliminated as soon as possible. It appears that the SEC and Commissioner Cox are placing attention on failure to delivers (naked shorting) problems that exist in the markets. As a shareholder in a company that is preparing to go to the Bulletin Board, I still have a grave concern that the abuses of naked shorting continue to exist. I have warned the officers of the company they should consider the possibility of naked shorting before taking the companys stock to the public market.
While the elimination of the options market maker exception and the grandfather provision will significantly strengthen Regulation SHO, these changes alone will not adequately solve the problem that results in continued naked short selling and failures-to-deliver. I request that the Commission (1) impose in Regulation SHO a requirement of a firm location of shares to be borrowed before a short sale can be executed, and (2) enable transparency by requiring timely disclosure of the volume of failures-to-deliver shares of companies on the Regulation SHO threshold list. The Commission should issue and complete promptly a notice of proposed rulemaking to implement these two critical components of effective Regulation SHO reform.