Subject: File No. 4-520
From: Francis L. Lemay
Affiliation: Investor

June 13, 2006

- I have been a small investor for some 30+ years. I had savings during the savings and loan scandals. I had investments during the mutual fund scandals. I hold stock certificates in now bankrupt companies with familiar and not so familiar names. In all I have owned a small part of the U.S. markets, or should I restate that position as saying, the global financial community.
This issue (Reg. SHO) has been discussed in the past, watered down then its business as usual in my opinion. When a regulatory body gives the appearance of working against the mission statement that they have set forth for themselves. This is a direct reflection on that body as a hole. You have been charged by congress to protect investors rights.
At your round table event please provide a detailed explanation of the enclosed event:
Regulators probe shorting of Vonage IPO
Report: NYSE looking into whether there was improper 'naked shorting' of Vonage shares on its first day of trading.
June 9, 2006: 8:30 AM EDT

NEW YORK ( - Securities regulators are investigating whether short sellers may have played a role in the steep decline in the stock price of Internet phone carrier Vonage Holdings (Research) since its initial public offering last month, according to a published report.
The Wall Street Journal, reported Friday that the regulatory unit of the New York Stock Exchange sent a letter to Wall Street securities firms Thursday asking questions about how the dealers may have facilitated short sales, in which investors sell shares at some future date, essentially betting that prices of the stock will fall.

The paper reports that the NYSE regulatory unit's questions in the letter appear aimed at determining whether or not dealers or their customers violated rules curbing the practice of "naked short selling," or selling shares without having them available or knowing they can be provided to the buyer when the transaction settles.
The report says rules that took effect in January 2005 put a new requirement on the exchanges to police improper naked shorting. An SEC official noted at the time, naked shorting could drive down a stock price in an "abusive or manipulative way."
Shares of Vonage (Research) opened at $17 on May 24, but those shares closed Thursday at $11.79, down more than 30 percent, making it the worst performing IPO of the year. The company already faces shareholder suits, one of which alleges omissions or misrepresentations in the IPO prospectus over Vonage products.
Vonage was one of the first Internet calling start-ups, offering customers cheap calls using their regular phones linked to a high-speed Internet connection. But Vonage has yet to report a profit, and it faces well-funded cable and phone-company competition, all of which had many analysts and investors skeptical about its prospects even before the poor early performance of its shares.
The Journal reports that on the first day of trading, more than 5 million Vonage shares were sold short. That was out of 33.8 million shares sold overall.
The bulk of such short-sale orders were placed early in the day, just as the stock began trading, according to the paper. Other NYSE questions asked for information about failures to deliver stock after the offering.
Vonage has appeared on an NYSE list of companies that have significant numbers of trades that haven't settled on time, the paper reports. The new short-selling regulations mandated that list, which gives traders 13 days to settle their trades.
The paper reports that questions specifically sought information about trades by prime-brokerage customers, which is a booming business in which Wall Street dealers provide services including stock lending to hedge funds that can be used for short sales.
Vonage made a unusual offer to allow its customers to buy shares at the IPO price. Some of those customers have threatened to refuse to pay for shares they pledged to buy at that price, questioning why the price was set so high as the market weakened in the weeks leading up to the offering.
But Vonage and the underwriters - led by Citigroup Inc., Deutsche Bank AG and UBS AG - have responded that the deal was more than five times oversubscribed.
Thank you in advance for your attention to this very important matter.

PS: I do not own the above stock or have I traded it.