From: William Lehr []
Sent: Tuesday, March 23, 2004 2:24 PM
Subject: rule S-7-23-03 (and nasd-2004-031)

Dear Securities Exchange Commission,

The OTCBB market is not supposed to be a vehicle for ransacking the investing public for the purpose of enriching a crew of market manipulators.

I would like to comment about the constant abuses of investors that have transpired primarily on the OTC BULLETIN BOARD for years. On February 20, an important new law, S-7-23-03, which would bring honesty and integrity to the OTC Bulletin Board market was to be put into effect, yet it was delayed! I like the idea that the change would no longer permit the esteemed “market makers” on the United States OTC Bulletin Board to short stocks without guaranteeing that the shares that they short would be delivered, as every other investor must do, within 3 days. Their privilege (a privilege that the long abused investing public does not have) to not have to deliver stocks that they have shorted has allowed them to exploit the public for years. It is incredible that they are allowed to continue this rape of the average investor. Here are my thoughts that are germane to the abuses the average private investor has endured at the expense of the market makers. It is the responsibility of the Securities Exchange Commission to correct them. 1-THE PUBLIC NOW REALIZES WHAT’S BEEN GOING ON. In the last six years, unless you live on another planet, you have seen first hand, what the brokerage houses have done to the public. They paid billions in fines for their transgressions; go back about six years where the Nasdaq members were fined $1.2 billion. And that was not for minor infractions! Make no mistake about it, directly or indirectly; they were fined for “stealing from average investors-the public!” Those are the investors that the SEC is pledged to protect. Let me state it very clearly, I do not trust the brokerage industry and above all the OTC Bulletin Board Market Makers for one minute. I consider them to be totally lacking in ethics. The last six years of revelations in the media confirmed that the public has been cheated. They were felonies, not misdemeanors.

2-STOCK CREATED OUT OF THIN AIR. I believe that allowing market makers to short stocks naked and continue to add to the short positions and worse yet, not worry about having to cover the shorts, borders on the criminal. They are literally creating stock to be sold short out of thin air. They can collude and create an unnatural amount of shares sold. Few small cap market stocks can withstand an inordinate amount of selling. Naturally, this naked shorting artificially creates more shares than truly are outstanding. It pushes the stocks down in price and often causes them to plunge in price, which is their strategy. It is akin to the spreading of a negative rumor about a company. For example: “Heavy selling occurred in XYZ Supplies Yesterday.” But the selling really didn’t occur by those who should determine it-its shareholders. It was the market makers who did it to serve their own campaign to cause a stock (stocks) to plunge.

3-THE WEIGHT OF THE ILLEGITIMATE NAKED SHORTS WEIGHS HEAVILY AND UNFAIRLY ON ANY COMPANY. By allowing the naked short selling by US and some Canadian brokerage house market makers with no required time limits to deliver the stock, the market makers often cause a stock to drop precipitously in price. This creates an artificial drop that creates an artificially low price. When shareholders see the low in price, many often tend to dump their own legitimately bought shares just to “get out of the stock.” A market maker would look at the short sale and say, “if we short another 10,000 shares (or 100,000 shares) of the stock, no bidder will buy the stock and the price will go down even lower.” That will often cause legitimate shareholders to sell their own stock. And that selling makes the stock go down even lower in price. It feeds on itself.

4-BORROWING MY STOCKS? By the way, if I am a shareholder of an OTC Bulletin Board Company, I do not want my personal shares loaned out without my permission to a market maker or short seller. I do not own shares to have them hypothecated and loaned to market makers who are trying to slam my stock. But worse yet, the “Naked Shorting” has allowed the divinely enfranchised market makers to create stocks out of thin air, short them, often sit for months and not worry about borrowing and delivering shares and await the opportunity to short more shares “naked.” It is so devious; it is incredible that the SEC has allowed it to continue.

5-MARKET MAKERS ARE BEHIND THEIR HIDDEN SCREENS. Ask any experienced stockbroker and they will probably tell you the same thing. The MARKET MAKERS DO NOT SHOW ALL THE BIDS AND OFFERS. IT WOULD INTERFERE WITH THEIR OWN ACTIVITES. And that includes the fleecing of the public with their enormous spreads.

6-I WOULD LIKE TO SEE THE PHONE RECORDS OF ALL THE CALLS MADE BETWEEN THE MARKET MAKERS MADE AVAILABLE WHEN REQUESTED AND SCRUTINIZED. Many times, we see trades occur that could have no other purpose than to knock stocks down in price and create an appearance of weakness in those stocks. Usually, they are bare minimal volume and low price “trades.” They literally “paint the tape” to serve their own purposes.

7-Eventually, the only real solution is to have the best bids and offers get the executions before anybody else. The OTC Bulletin Board will fight this idea tooth and nail. THE UNITED STATES NOW REMAINS THE ONLY PLACE LEFT IN THE WORLD THAT DOES NOT HAVE ELECTRONIC TRADING WHERE THE BEST BIDS AND BEST OFFERS RECEIVE THE TRADE EXECUTIONS. The time has come for the changes to be made, at the least on the Bulletin Board. Certain slime balls will fight it, thus keeping the public behind the eight ball.

8-Most investors, brokers and funds never consider stocks that trade on the bulletin board. They say that many companies offer good value but they simply will not tolerate the MACHINATIONS OF THE MARKET MAKERS. You will find that most investors feel as I do.

9-The purpose of stock markets is to create capital for companies and liquidity for investors. Companies create jobs. As most know, small companies, not large caps, are the primary sources of jobs in America. The SEC must address this problem.

10-The major step in the right direction for the SEC is to no longer permit naked short selling. The SEC should make the markets fair to everyone and that would include average investors.

I have been an investor for over forty years. I (and my friends and business associates) have rarely invested in Bulletin Board stocks primarily for the reasons that I have stated. I am a retired president of a private chemical company, so I have no personal interest in regards to my own company as a tradable stock. The best markets for the public are honest markets. That’s something the SEC can bring to the public by enacting the new rule S-7-23-03. Speaking for most private investors, I say, “enough is enough, the sleaziness and duplicity have to end.” This change is vital.

William Lehr,
1944 Marsh Oak Ln. Johns
Island, S.C. 29455