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InvesTrend
Subject: NASD Rule 3370 - Reform extension to April 1, 2004


By now we all know that the NASD backed off the Rule 3370 reform package due to
requests by the member firms.  It was simply not convenient.  Members have
identified that they could not meet technological changes in time for the
February 20th timeline so they have extended the closing of a major loophole in
the securities markets to April 1, 2004.  Rumors, however, are identifying that
the real reason for the extension was the present status of Member books and
with the issue of some members being upside down in their accounts by hundreds
of millions to $1 Billion.  What this means is that based on present values,
should these firms simply go out and buy the stocks at present day prices, it
would cost upwards of $1 billion to do so to settle their books (and that is per
Firm).

Now, is that rumor real?  Who knows.  What we do know, however, is that there is
NO EXCUSE for the NASD to move the April 1, 2004 date again.  To do so would be
at the detriment to every retail investor who owns stock in the companies this
loophole allows to be abused.  The extension from an October 2001 first request
to the SEC to an April 1, 2004 reform date is egregious enough.  The simple fact
that this rule change is solely about OFFSHORE (non-member) shorting US Stocks
should be of growing concern because we have been told repeatedly that shorting
is good for the market but is not a majority of the trading in the markets.  Why
we would not simply take a risk of no offshore shorting until their systems were
up vs. allowing this loophole to remain open is a question only the NASD and SEC
can answer?  REVENUE!

Those of you who are on distribution from the media, I would request that you
keep tabs on this particular issue and the future actions of the SEC and NASD on
this matter.  You have taken the SEC and the NASD at their word to date as to
why they have extended this rule change and have not fully questioned the issue
of the loophole itself.  The excuse they gave was rather weak and should
certainly be achieved over the extended period allotted.  For them to provide
any additional extensions would be an clear sign that the retail investors best
interests are being sacrificed for an issue they clearly do not want people to
know about.  That would be another blatant example of the SRO's putting the
member firms interests above the interests of the investors they are chartered
to protect.


Dave Patch
www.investigatethesec.com