From: Lawrence J. Goldstein [lgoldstein@smplp.com] Sent: Thursday, December 12, 2002 10:55 PM To: rule-comments@sec.gov Subject: File No. S7-40-02: sarbanes/oxly 33-8138 ----- Original Message ----- From: Lawrence J. Goldstein To: rule-comments@sec.gov Sent: Thursday, December 12, 2002 10:44 PM Subject: sarbanes/oxly 33-8138 REFERENCE: File No. S7-40-02 Letter to Jonathan Katz Securities and Exchange Commission subject: Sarbanes/Oxley 33-8138 Posted December 12,2002 No response received following Original mailing 11/1/02 via USPO snail mail Santa Monica Partners, L.P. -- 1865 Palmer Avenue, Larchmont, New York 10538 (914) 833-0875 LJGOLDSTEIN@BLOOMBERG.NET November 1, 2002 Mr. Jonathan G. Katz Securities & Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Dear Mr. Katz: I write as a concerned investor. The passage of the Sarbanes/Oxley Act and the rules being promulgated to implement the new law is having unintended consequences. I want to point this out with the hope that the Commission will see fit to provide appropriate exemptions. Auditors have given many issuers notice that in light of the added work required and the added liabilities resulting from S/O, that they will find it necessary to charge fees in 2003 higher by some 25-50%. In addition, audit audit committee members will be subject to greater liability than ever before and will also have to devote much more time and effort to their audit committee responsibilities and duties. Thus they too will demand and deserve much higher fees and incur expenses, which will be substantial in amount. For small companies and those barely profitable in particular this burden of new fees and expenses will be intolerable and in fact unreasonable for many to be expected to bear. The solution is already beginning to be seen. It is to deregister from SEC control and hence not be subjected to SEC rules and regulations and therefore the material increases in expenses. Not to mention all other costs associated with being public and registered with the SEC and having to file K's, Q's, 14A's etc. We have recently seen how this is being accomplished and will we believe soon steamroll into an avalanche of companies removing themselves from SEC regulation. By doing reverse splits, so as to fall below 500 shareholders (for Companies with less than $10 million in assets) and for all other companies with fewer than 300 registered holders. Reverse splits, to get down below the 500 or 300 registered holders requirement for deregistering from SEC regulation under the various schedules of Section 12g is already starting to take place and we believe this phenomenon will accelerate simply because of the material added costs of SEC regulation under the S/O new rules. This is clearly an unintended result which will drive companies private and/or into the "never never" world of the very inefficient "Pink Sheet" trading market which the Commission and the NASDQ both sought to alter or eliminate when it set up the NASDAQ Bulletin Board twelve years ago. Dozens of companies we know have reverse splits in the works and scores, indeed hundreds of companies we know have reverse splits in the works and scores, indeed hundreds of others (perhaps even thousands) may reasonably be expected to consider if not actually effect reverse stock splits to reduce or eliminate shareholders. Already numbers of companies with fewer than $10 million in assets and fewer than 500 shareholders have begun the deregistration process. This seems unfair and certainly an unintended consequence, and so we herewith petition the SEC to consider rules exempting perhaps some, if not all SB Companies from the new, and to be promulgated, rules and regulations S/O dictates. Failure to do so will mean thousands of investors in smaller companies will be forced into selling at prices determined by freeze-out reverse splits and this would cause pain, financial loss and the loss of potential long-term gains small company investment has offered investors for the past 100 years in the U.S stock market over which you preside. Moreover millions of investors will see the market value of their shareholdings plummet as liquidity and transparency will disappear. Furthermore, financial and other information from the companies in which they are invested will also disappear. Investors will be left holding the bag. This is a disaster of major proportions for investors, the marketplace, and hundreds, indeed thousands of issuers and hence the SEC itself. This is a call to action, which we urge the Commission to consider and to take immediate action on, please. Sincerely, Lawrence J. Goldstein General Partner All replies to this email must be sent to LJGOLDSTEIN@BLOOMBERG.NET. Thank you.