From: Peter Chepucavage
Sent: May 26, 2005
Subject: File No. 265-23

To Members of the SEC Advisory Committee on Smaller Public Companies

I am responding to your Request for Public Comments on Summary of Proposed Committee Agenda.. I wish to incorporate and expand upon the comments of Brad Smith regarding a macro or more comprehensive approach to small companies and to use his term small to medium enterprises (SME'S). A more comprehensive approach is necessary and appropriate because there is a need to review not only the small company issuers but also the markets and broker dealers involved in the raising of capital for SME's and the public perception of the regulation of those markets.

In a recent explanation of the key points of Reg. SHO,the staff stated"Speculative stocks, such as microcap stocks, often have a high probability of declining in value and a low probability of experiencing above average gains." The committee should review the underlying data for this proposition to determine whether it is true for all low priced stocks in general or just those traded on the pink sheets and otcbb with a view to determining whether such stocks could ever be suitable for retail investors or whether they should only be sold to investors qualified by knowledge of these markets.

In the column Washington Investing, Wash Post 5/23/05 p.1 Jerry Knight refers to the "purgatory of the Pink Sheets,a nearly unregulated nethermarket for trading stocks". the committee should evaluate this statement and if necessary recommend increased practical regulation such as short sale reporting and Reg SHO coverage.

Reg. SHO excluded these stocks from its coverage and the committee should therefore review why the most speculative stocks are not included.

The SRO short sale reporting rules exclude these stocks from their coverage.See petition of the Pink Sheets to include them as an example of a market seeking more regulation.

The SRO'S have failed to enforce their locate requirements for short sales thereby encouraging naked shorting in these markets.Except for one case, the penalties imposed over the last 10 years include modest fines probably less than trading profits made.

These stocks are not eligible for margin or options and thus the loan supply is curtailed enabling naked shorts and the inability to hedge.See Comments of Professor Angle to Reg SHO.

The Commission is reluctant to provide an arbitrage exemption for short sales which makes the distribution of many small company issues thru Pipes and Wt arbitrage. The committee should review the merits of suchan exemption.

The presidents and CEO'S of small broker -dealers believe they are often held responsible for their employees conduct while those of large broker dealers rarely are . They also believe penalties imposed on small bd's constitute a much larger portion of their net capital and are inherently unfair.This is an old argument but continues to resurface and should be addressed.

The chairman of the PHLX recently noted that he worried that the Commission staff would be overwhelmed with the NYSE/ARCHIPELAGO and NASDAQ/INSTINET mergers and not have time for the rule filings of other smaller SRO's.

Small companies are more likely to be referred to as penny stocks,unless like Lucent at $2.50 a share they are listed on the NYSE.

There may be no reliable evidence that small bd's and small companies create more regulatory issues than the Enrons,Worldcoms,Tycos and other similar large companies that have required significant regulatory resources.The committee should review whether they do in fact create more regulatory issues.

There is a proliferation of unregistered finders operating in the area of SME'S because of the lack of clear guidance from the Commission.It should also consider studying the role of finders in the process and might consider whether those finders should be registered as investment advisers rather than bd's.

The Committee should not be reluctant to challenge conventional norms in its approach. The Committee should therefore recommend a special study of the regulation of SME's and small bd's to determine if the regulatory scheme is adequate and consistent and does not impose a greater burden on them especially in light of their job creating value in the U.S. It might also recommend the creation of an independent small business/small bd office at the Commission with a significant increase in staffing.While it is not the Commission's role to encourage small to medium enterprises or bd's, it is their obligation not to hinder them and to pay equal attention to them. This Committee has a rare opportunity to set a future agenda for SME'S in this country .As the markets rapidly consolidate, attention to SMEs and bd's is important whether it results in more or less regulation or more reasonable regulation. Small investors need small broker dealers for sound advice and small issuers need them to underwrite and market their securities.These markets and brokers deserve the same amount of attention as the NYSE and NASDAQ BECAUSE THEY ARE SPAWNING GROUNDS FOR THOSE LARGER MARKETS.