Subject: File No. S7-08-09
From: Jack W Rosen, Esq.

May 6, 2009

I suggest we go back and resume the short selling rules before the changes in 2006 or so.
First the old solution was in place since 1933 and time has shown it to be a successful answer to the problem FDR sought to solve had after the 1929-1933 pool raids and disastrous short selling. He in fact went to the best authority as to how to best thwart these fear opportunists, by appointing Joseph Kennedy to head the SEC and install rules to thwart Joe's old buddies. The rules were issued with the aid of an expert, Joseph Kennedy. They worked until the changes fostered by Ivory tower and professorial studies, based on a short period and upon a unusual rising market. They did not work in 2008 and 2009 as was promised when the banks were being assailed, by rumours and the steady short selling, coupled with the fear mongering, so much that the agency temporarily stopped the short selling for a time. If it was good for banks in extremis, why not for the rest of the mkt.
Time has shown the old rules if "enforced " will work. The short test was an experiment that seems nice for the academic thinking, but not based on the "real world" in real time when the mkts are under attack.

We need for the protection of the smaller investor, all the old rules, not a short circuit that will be evaded by the big guys, but a valid all the time uptick rule and vigorous enforcement of the requirements to have the stk or access to it before selling short. The confidence of the average investor is eroded when large players can relentlessly sell, sell, sell, without upticks, and without having access to the stk. This allows a stock with say 100 mil outstdg to end up with a huge number of stk being sold short way in excess of the 100 mil, with no limit in physicxal terms to the number of shares able to be sold short. This creates a phantom stock supply. With such an onslaught, it is easy to "panic" the shareholders, and the level field is no longer level. I am a free mkt guy, but to allow unrestrained short selling, along with the temptation for short sellers to hype and bad mouth a co. together with the limited $$ they put up for the sale, as against those who buy outright, or on margin, means we have substituted a "free mkt" for rapacious, panic driving irrational behavoir.

The past rules set by Old Joe Kennedy to thwart these raids by the "pools" worked and should not be set aside and kept aside as it has been for the past 2 years, for a theory of polcing, shown not to work under a tota laisse faire philosophy.

Don't enforce the short selling rules and twist them to aid and assist the hedge funds ( the modern day pool speculators of the 20s and 30s, if you wish to drive the smaller investor out of the mkt.

You have a public trust and a new leader. Hopefully the purpose of the SEC to protect the public will find a new birth of renewal, not just the Wall Street insiders, hedgers, market makers, and the scarem types. The manipulation has to stop, and if the SEC will not, then the mkt will by convincing the average already shaken investor that the system does not work to protect his interests, thus having the investors leave the mkt in a whoelsale manner.

After 1929 it took until the 1970s to get the average investor back into the narkets in any meaningfull numbers. After the recent debacles does the SEC want to be blamed for the leaving of the mkts by the average guy en mass??, with another 40-50 years before they return?