Corporate Capital Securities, Inc.
222 W. Comstock Ave., Suite 221
Winter Park, FL 32789

July 24, 1998

Mr. Jonathan G. Katz


U.S. Securities and Exchange Commission

Mail Stop 6-9

450 Fifth Street, NW

Washington D.C. 20549

Re: File Number S7-14-98

Dear Mr. Katz and Commissioners:

In response to your request for public comment on Release No. 33-7541 entitled Revision of Rule 504 of Regulation D, the "Seed Capital" Exemption, the following discussion reflects our support of the Commission's objective to eliminate fraudulent manipulation of shares issued under Rule 504 and our recommended revisions to the proposed changes.

We strongly support the Commission's stated "four-pronged approach to minimizing 'microcap fraud" in the form of "enforcement, investor education, compliance examinations and regulation." However, we also concur with Mr. Petersen's response to the proposed 504 changes dated June 1, 1998, as to the probability of success of an individual intent on committing microcap fraud and carrying through in its perpetration. Investment fraud has been with us for centuries from the tulip bulb scandal to the salad oil scandal to the oil pipeline fraud that even victimized Walter Wriston, chairman of Citicorp. The SEC has in the past and continues to this day to successfully close down numerous firms and operations that have been conducting fraudulent and manipulative activity in the markets. Unfortunately, despite the Commission's success, it would be naïve to believe that the Commission will be able to stop microcap fraud, or any other investment related fraud for that matter, through any approach regardless of how comprehensively it may be constructed. At best, the Commission can only continue its superlative efforts to contain such abuse of our markets.

These efforts as enumerated by the "four pronged approach to minimizing 'microcap fraud" must also continue to be balanced against the capital needs of corporate America, the American workforce and the public's investment interests. In the case of the proposed changes to Rule 504, the Commission should keep in mind that over 65% of our nation's GDP (Gross Domestic Product) is from "small business." To bring the holding period for Rule 504 stock under the Rule 144 restrictions will certainly have a dramatic effect on the economy (i.e. more than $100 million). If, according to the Commission, "approximately 1500 Forms D have been filed under Rule 504 in each of the past several years," and the average contribution to GDP per company was $2,000,000; the negative economic effect of the proposed rule changes should investors avoid Rule 504 offerings in the future could approach $10 Billion over the next three years. Add to this the loss of potential jobs and you have what any reasonable person wwould consider to be an erroneous rule change.

If, as stated by the Commission, "the scope of abuse is small in relation to the actual usage of the exemption," then there is a legitimate concern by the small business community that one of its most promising opportunities to raise "seed capital" will effectively be neutralized, or at the very least, rendered significantly less productive. It should be noted that what the Commission has granted in the Rule 504 exemption has already been effected by a number of states through their own state rules. Several states have taken measures to reduce the transferability of 504 shares. As the Commission has noted, the Rule 504 exemption is designed to defer to the states "Home Rule." It is our position that should the Commission adopt the Rule 144 standard, it would deny the states that flexibility. Since the Commission believes that the incidence of abuse is relatively small, and since applications for Bulletin Board registration amount to less than 1/3 of the Form D submissions, lets deal with thhe abuse and those who perpetrate the fraudulent activity rather than throwing out the baby with the bath water.

FIRST, we believe that a holding period by initial investors is not unreasonable. However, we believe that holding period should be at least 90 days from the date of issue and not more than 6 months from the date of issue.

SECOND, we believe that EVERY company that comes to the public trough for financing has an obligation to periodically communicate its financial status to its shareholders. By "periodically" we mean not less than quarterly. By "financial status" we mean Income Statement and Balance Sheet. These are documents that responsible executives and managers of business need to evaluate their progress. If they need to do them anyway, then they might as well share them with their investors AND the SEC. Therefore, we feel that ALL publicly held companies should, in some fashion, be "reporting" companies with the above standards being minimal compliance.

THIRD, we believe that ALL Rule 504 offerings should be accompanied by a disclosure document or prospectus as is currently required under other provisions under Regulation D. This form of documentation is imperative if the investor "education" issue is to be addressed. We believe that the combination of offerings conducted only by prospectus and becoming "reporting" companies will significantly reduce abuse. This logic behind this reasoning is the fact that most abuses in the "pump and dump" arena require control of information. If investors can only see and hear what the manipulators want them to see and hear then the investor has no means to protect themselves from MISinformation.

FOURTH, we believe that in order for abusers of the markets to execute a "pump and dump" scheme, they must work as quickly as possible. That is to say that TIME is the abusers enemy. The longer it takes for the scheme to execute; the more likely several things can happen to negate the scheme. Specifically, a prolonged execution of the scheme increases that opportunity for it to be discovered by the authorities. A long "pump" period increases the opportunity for accurate or conflicting information to be disseminated. A long "pump" period increases the chances that certain players could discover that a "pump and dump" is on whereby, if marginable, these players will begin "shorting" the stock to the extent possible (i.e. availability) and thereby neutralize the "pump" and force a premature "dump" whereby the "short" players could reap significant profits while the original abusers end up with small gains or a loss. Regardless, the result is the destruction of the company's market position andd credibility for the foreseeable future.

The question is not whether there should be a holding period to deter such activity, but how long a holding period is necessary to deter abuses. Our opinion is that 90 days is minimal and beyond 6 months is unnecessary. The Commission's desire to use the standard of Rule 144 in order to gain uniformity with other areas of Regulation D is to ignore the drastic consequences in what can only be described as reckless abandonment of addressing the issue at hand. Using "uniformity" as a justification for imposing Rule 144 standards is pure pabulum. If a company has had to use a prospectus in selling its offering, and it becomes a reporting company immediately upon the completion of that offering, it appears to us to be virtually impossible in this day and age with the Internet and other forms of rapid communication that potential abusers of the system could perpetuate any "pump and dump" scheme for any period even close to 6 months.

FIFTH, it is our opinion that the Commission should pursue a course of regulation authorized by Congress that would raise the stakes against those who would attempt to unlawfully manipulate or influence the performance of a stock in the markets. This should include the authorization to appoint a receiver for any company whereby the officers and/or directors are found to have participated in a manipulative or "pump & dump" scheme. Complete disgorgement of all proceeds of the "dump" and any remaining shares which would then be immediately returned to the company in the form of treasury stock. Enforcement of sanctions against all who would seek to defraud through manipulation of any stock should be pursued vigorously.

Apart from the issues of holding period, reporting and offering by prospectus, we believe strongly in maintaining the ability of Rule 504 offerings to be offered through general solicitation and advertising. Again, this area should be controlled through state regulatory determination. To the extent possible, the states should be encouraged to coordinate their views on Rule 504 with the objective of achieving as much commonality as possible.

As to the issue of electronic filing of Form D, it is our belief that electronic filing should be encouraged in every respect including the filing of the prospectus that we believe should be required. In addition, we believe that the Commission should encourage each company seeking funding under the Rule 504 exemption to establish and publicize a Website which should be required to contain the full prospectus as well as the Form D when filed and any other informational disclosure that the Commission feels is appropriate, including the posting of accurate information to correct any "hype" or "pump" attempts by others. Furthermore, we believe that all solicitation of such purchases be accompanied with the disclosure of the Website address and the encouragement to verify all information from official sources. We believe that compliance with these provisions should be verified through written documentation and signature of both the broker executing the trade and the investor.

In addressing some of the ancillary issues, our position is that no further restrictions should be implemented on types of companies, price of shares offered or market capitalization. To seek further restrictions in these areas is to attempt to micro-manage such offering. This in our opinion would prove to be counterproductive.

As to the current dollar limitation of the Rule 504 exemption, we would encourage the Commission to give serious consideration toward doubling or even tripling the current $1 million limitation. Since Rule 504's inception over 15 years ago, financial conditions have changed considerably. We believe that the time has come for a new limitation which more accurately reflects a realistic equation to the value of the current limitation at its inception.

Respectfully submitted,

Louis C. Magill