Subject: File No. SR-NASD-2004-022
From: Don Herzog

December 20, 2004

Thank you very much for taking the time to review our opinion and concerns regarding this issue.

Based on our understanding and analysis, this ruling would have devastating effects to a significant portion of strong, promising public companies.

As you know, many successful companies sell restricted stock as a means to access the capital markets. The cost of this capital is often reduced by means of prospectus registration covenants. For many companies these financing structures are the only vehicle to bridge towards profitability or to successfully initiate growth opportunities.

The economic expense and administrative burden of selling restricted stock via prospectus registration is currently incorporated into a companys cost of capital for such structures. Realistically, any additional expenses would be passed on to the company by the investors involved in the financing transaction. For example, investors would pay less for stock or require additional warrants to offset any greater liquidity restrictions that may be imposed. Investment firms that did not pass these costs on would, in all likelihood, cease to exist over time due to the economics involved.

The liquidity restrictions being contemplated by this rule would drastically increase the cost of capital. Unarguably, many companies would find it too difficult or too costly to raise capital under the proposed changes.