Securities and Exchange Commission:
450 Fifth Street, NW
Washington, D.C. 20549-0609

Re: File # S7-23-03

Dear Mr. Katz,

When the news of the proposed Reg SHO came onto our radar screens there were high 5's everywhere amongst U.S. micro cap corporations that had fallen victim to naked short selling "bear raids". It was similar to the euphoria felt when the "BBX Exchange" announcement was first made ostensibly to finally address this phenomenon called naked short selling. Those whose legal teams have not carefully dissected the entire text of the proposed Reg SHO are in for a let down unless we can convince you of the shortcomings of the proposed rule. Otherwise we're going to be in for another 5-year cycle of Concept Releases, Rule Proposals, and Rule Adoptions. These companies are not going to be around in 5 years so now is their last chance.

We notice in the text that the anti-fraud measures invoking the Rule 11830 threshold parameters for seeking protection from FURTHER naked short selling are currently aimed at abused companies THAT ARE CURRENTLY FULLY REPORTING ONLY.

We feel that we have to remind you that the 1934 Securities Exchange Act clearly allows an exemption from the registration and filing requirements to small companies with less than $10 million in assets. Congress noted that the registration and filing process would be cost prohibitive to many of these issuers and therefore created a 12-g exemption. We can only interpret the proposed Regulation SHO as currently written as some type of "veiled" attempt to allow protection from these fraudulent acts to be bequeathed ONLY upon U.S. investors in U.S. micro cap corporations that "VOLUNTARILY" waive their right to the 12-g exemption. Pardon my cynicism but does not this "protection in exchange for some type of consideration" belong more in an organized crime movie than in the U.S. financial markets? The very key Rule 203 mandatory close out provision as provided by Rule 11830 is PROPOSED to only apply "to all securities registered under section 12 of the Exchange Act. THIS DOES NOT INCLUDE PINK-SHEETED COMPANIES THAT ARE CURRENTLY NONREPORTING as presumed by those nonreporting corporations doing all of the high 5's. For the sake of balance, there are indeed some aspects of Reg SHO that will help the nonreporting issuers, BUT THIS ONE IS CRITICAL.

Let's cut to the chase here. The SEC's historical stereotypical attitude that ALL nonreporting U.S. Corporations trading on the Pink Sheets are "SCAMS" unworthy of their protection until proven otherwise has caused probably trillions of dollars of losses to the micro cap investors that prefer these investments. The current text of Reg SHO provides the ultimate corroboration of this mindset. THIS IS THE ROOT OF THE WHOLE PROBLEM-THIS MINDSET. The bad guys know with 100% certainty that the cops won't be there when the investor's pocket is being picked.

The 12-g exemption from registration and filing for tiny U.S. corporations has never been more needed than in this post Sarbanes-Oxley era. Keep in mind the sequelae of naked short selling. The victim company is sitting there trading at perhaps 10% of its book value after the onslaught. Their "corporate currency", or price per share, has probably lost 90% of its pre-attack value. The Board of Directors that wants to gain the credibility enhancement from becoming fully reporting now has to make a decision. Do we sell yet more shares at perhaps 80% of these incredibly decimated price levels to fund the audit and the Sarbanes-Oxley compliance measures or do we wait until our share price miraculously recovers? Do we double the amount of shares issued and outstanding and get our already decimated share price cut in half yet again or do we wait out the storm and wait for the BBX or Reg SHO to save us?

Whether you choose to change the 12-g exemption rules or amend the Reg SHO proposal to provide protection for ALL U.S. micro cap corporations, whether filing or unable to file, please don't play the "protection racket" card. You folks at the SEC need to get out in the trenches and see the mess that this historical "MINDSET" has created. These U.S. corporations and their investors are in a lot of pain and they're dropping like flies! The vast majority of nonreporting U.S. micro cap corporations are run by honest entrepreneurs that were targeted by fraudsters very well aware of the SEC's historical mindset towards nonreporting companies. You folks owe these corporations and their shareholders BIG TIME!

The other big surprise that these victim corporations and their victimized shareholders might have to face is that the proposed Reg SHO has failed to address the question in everybody's mind. JUST WHAT ARE YOU GOING TO DO WITH THE MASSIVE "OPEN POSITIONS" YOU DETECT WHILE CREATING THESE "RESTRICTED LISTS"? The American investing public ASSUMES that you are going to do the right thing and buy these in. They assume that during the creation of these "restricted lists" that you will find the evidence of massive fraud and deal with it in a proactive manner. You don't tell bank robbers that you can keep the loot from your last 10 years of robbing banks but from now on you can't rob any more banks. How could you in good conscience NOT address this? Since they are the result of the sale of nonexistent entities that were not delivered for an extended amount of time, one would assume that you would correct this probably never to be delivered "counterfeit electronic book entry". YOUR SILENCE ON THIS MATTER IS DEAFENING! This issue is the 500-pound gorilla that these victim corporations need addressed. ARE YOU GOING TO THROW THEM A LIFE PRESERVER? YOUR FAILURE TO DIRECTLY ADDRESS THIS POINT IN THE PROPOSED REG SHO TEXT SCARES THE HECK OUT OF THE AMERICAN INVESTORS IN MICRO CAP SECURITIES. THESE INVESTORS AND U.S. CORPORATIONS DON'T HAVE THE LUXURY OF WAITING ANOTHER 5 YEARS BUT BOY WOULD THE FRAUDSTERS EVER RELISH THE OPPORTUNITY!

One concrete suggestion that I would have that should find favor with the anti-pump and dumpers and the anti-naked short sellers is this: Force nonreporting corporations to make public their current number of shares issued and outstanding if they want access to the "safe harbor" provided by the "restricted lists". In fact, it is a necessity to be able to calculate the one half of 1% threshold value for protection from FURTHER NAKED SHORT SELLING. Nonreporting public corporations have no excuse not to let the public know of their share capitalization numbers. If we're demanding that Wall Street "professionals" not hide their actions in the dark then the corporate issuers must act accordingly. Many do however have a legitimate reason to not become fully reporting at the moment. This approach would provide access to much needed protection from further naked short selling that these nonreporting companies need more than any other issuers in the system. PLEASE AIM THE PROTECTION TO WHERE IT IS MOST CRITICALLY NEEDED, ESPECIALLY SINCE THE VERY BROAD FOUNDATION FOR THIS FRAUDULENT BEHAVIOR IS BEING PROVIDED BY THE SEC's HISTORICAL STEREOTYPICAL ATTITUDE THAT ALL NONREPORTING ISSUERS ARE SCAMS UNTIL PROVEN OTHERWISE AND UNWORTHY OF THE PROTECTION AFFORDED TO OTHERS. This would also circumvent any implications that "protection" is being purchased for a certain "consideration" that is contrary to the spirit and text of the 1934 Securities Exchange Act.


Dr. Jim DeCosta