Subject: File No. S7-30-04
From: Paul R Davis
Affiliation: Attorney

November 7, 2004

Hedge funds relatively new to the public now are starting to reach the mainstream media. They have been blamed for everything from the rapid rise in current oil prices to manipulation in the equity markets. No doubt some of the hysteria is exaggerated. However, the real reason for this is that they operate in cloaked environments, in stealth mode, unlike mutual funds or other comparable investment vehicles. The potential for abuse for investors in hedge funds, as well as to the general public who invests in securities contemporaneously, is enormous.

Clearly, the term hedge funds, is so all-encompassing that no one size fits all. As for securities, it is necessary for the SEC to have the power to protect investors from the growth and influence of hedge funds. The issue of naked shorting clearly is linked to the growth of hedge funds.

Proposals are not to outlaw specific activities but to make sure there is a level playing field and full disclosure to protect the investing public and the markets. To do this, full disclosure must be made by hedge funds in, inter alia, the following areas:

1. Hedge fund shorting activities alone or in concert with those who provide financing or PIPE transactions, or combinations thereof.

2. Accumulation of equity positions or short positions similar to what is disclosed by mutual funds.

3. Naked shorting. If a hedge fund holds such a position, it should be reported, as well as under which exception to the general prohibition such naked short position is allowed to be continued.

4. Dissemination of information in public forums. When a hedge fund acting through employees, agents, associates, or others with whom they may share benefits, directly or indirectly, disseminates information intended for the public, on message boards, by press release, or otherwise, full disclosure must be made of any position, long or short, above a minimal level.

Thank you for your consideration in these matters.