October 7, 2005
Subject: File No.265-23
It is evident that small business and investors in those businesses are being severely punished by the lack of enforcement of Securities Laws and Rules which have been implemented over the years to reduce and minimize the criminal activities and fraud in the Securities Markets.
An example of this can be found in Regulation SHO. By admission of the SEC, no enforcement actions have been made in the year this Regulation has been in existence. Also the very nature of certain provisions of the Regulation seems to indicate that the Commission is not interested in enforcing the law, since they completely ignored portions of it by "grandfathering" Failures to Deliver, existing prior to 2005. Although, excessive paperwork can be a problem and should be minimized when possible, a much larger threat to small and medium sized business are predatory hedge funds, brokers and many others who seem to feel they have open season to prey upon small startup businesses as well as the many retail investors with what to many seems like impunity, due to lack of enforcement by the SEC. All of this is occurring while being assured by constant press releases and policy statement that the SEC is there to assure that markets are fair and honest. After 10 months many of the original company's on the SHO list continue to be on it. Why? Why is there not transparency regarding SRO's. Company's who have been victimized by "Failures to Deliver" are identified held up for the world to see. But we have yet to seen any of the violators of the Regulation identified. In fact, we do not even know the extent of the Failures. How can an investor make an honest evaluation of a Company without this information. Some of the responses by the SEC staff to this question has been, well just don't invest in companies on the SHO list. This only confirms our worst fears that the SEC is not interested in fairness, when the enforcement of their regulations and attitude is one of punishment of the innocent, and what seems like a condoning of the acts of the guilty.
Please, consider the harm that is being done, both to the individual investor as well as the loss of confidence and integrity in the markets. Require that _all _laws, rules and regulation be strictly adhered to. Companies should fully comply, but so should Investors, be they Institutional, Hedge Fund, Mutual Fund or Retail. The SEC should create sufficient filing and reporting requirements to determine full compliance. When compliance is lacking, action should be promptly referred to the DOJ.
Thank you for your attention and consideration of these problems. I feel they are not only important to the individual investor but to the future of the markets as we have known them.