Subject: File No. S7-08-08
From: Michael E Kushner, DMD
Affiliation: My original entry was corrupted by a hacker please read comments

April 9, 2008

Honorable committee members,
As we are all aware legal short selling has its place in the market to counter unsustainable irrational exuberance for equities and help encourage a balanced two way analysis and discussion to promote reasonable pricing, transparency and good management of companies.
Under current SEC rules, an organization involved in short selling is obligated to locate and transfer borrowed shares within a reasonable period of three days. The stock should reasonably be in the possession of the broker within this time period. This would ensure that the short selling is a real transaction and not a fraudulent selling of phantom shares intended to bring the stock price down for the purpose of extracting equity from shareholders without taking risk. The creation of the SHO list was intended to enlighten the public about the extent of naked short selling. It does reveal those companies where stocks have been shorted for close to a year with an outstanding failure to deliver, but what purpose dose it serve if we have not giving the SEC the resources or the directive to follow through and prosecute those individuals who are profiting heavily by selling non existent shares in an attempt to to destroy the stock of good companies. It is the small cap companies that are vulnerable to this criminal manipulation an have become targets for institutional short selling. These are the very companies that historically have made this county competitive through inovation and the creation of jobs. Failure to enforce penalties against the fraud of naked short selling has destroyed good companies, caused loss of jobs, weakened our competitiveness, and has allowed criminal institutions to loot equity from investments depriving hard working families of their dreams of being able to send thier kids to college or have some security for their old age. It is time to take action against naked short selling.
Enough damage has been done to investors and companies by endless discussion with no sanctions or prosecutions. You dont have do split hairs as whether or not to create a new term fraudulant naked shorting . Failure to deliver for months at a time is clearly fraud. The stock market is reeling from billions of dollars now being shorted by hedge funds with most shorts being undelivered shares.
The market maker exception makes it much easier to hide naked short selling as short sales are covered and options are shorted at the same time to role the date forward. Old short positions being grand fathered in makes it unnecessary for shorts to ever have to cover until the pps is brought to zero, thus bankrupting a company by selling phantom shares with impunity and no penalty. Its time to repeal the market maker exception.
What brilliant argument or whos influence, convinced law makers to repeal the uptick rule which has served to mitigate extreme volatility and protect us from market crashes since it was created after the lessons learned from the forensic reconstruction of the factors leading to the crash of 29. Since the uptick rule was repealed market volatility has increased drastically leading to both the fed and the treasury having to take extreme measures to stabilize the market.
Let us learn from our mistakes and reinsatute the uptick. rule.
The American tax payer is not happy about a total lack of oversight by the SEC, leading to the kind of recent finanial instability where the most recent remedy conceived was a tax payer bail out of one of the very companies, (Bear Sterns), complcit in the fraudulent activity of naked shorting.
Our financial institutions require regulation, oversight, and enforcement to protect investors and maintain confidence. In the long term this will give the economy strength and our country the security we desire.