Subject: File No. 4-590
From: Gunther Karger
Affiliation: President, Discovery Group

September 12, 2009

Topic: Shorting low price stocks and stocks involved with reverse splits

There is substantial abuse in shorting low price stocks and stocks subject to announced reverse splits. When stocks approach the one dollar level, traders short these to cause them to fall below $1.00 thus causing the violation of the One Dollar minimum bid rule on exchanges triggering a major move into the penny range often leading to delisting and difficulty by the company to raise funds. Similarly, traders often target stocks subject to reverse splits shorting them the effective day of the split driving again those stocks down.

These actions which are adverse to the average investor and may not be available to most investors contribute to the loss of confidence in markets and in the regulators who are emplaced to create and maintain a fair market place. I therefore recommend that the SEC change its rules to rectify these long term problems by implementing the following specific rule changes relative to short sales:

1. Prohibit short sales of all stocks below $2.00.
2. Prohibit short sales of any stock from the moment a reverse split is annnounced by the issuing company until six months after the effective date of the reverse split.