Subject: File No. S7-08-09
From: Lawrence F Glaser

May 28, 2009

Further comments germane to my March 11 comments.

Withough knowledge of the SEC's recent decision to overhaul its own internal watch process, I find CONFIRMATION of my prior comments in that the SEC has admitted holes in its own internal system. It WAS NOT monitoring its own internal employees' trading.

Given the recent overhaul of the Commissioners themselves, I would argue, strongly, the OIG needs a house cleaning. Perhaps Congress could be addressed to do this if the SEC lacks the authority.

If any one entity sat and watched the SEC fail, and the US Financial system burn down for it, it was the OIG of the SEC. The very watch dog of the investor protectors.

The other issue which must be addressed is this smoke screen of the exchanges not having jurisdiction to report to the SEC, violations it roots out and finds evidence for. This is frankly, amazing. The exchanges, to be lazy and carry on a do nothing attitude, protecting their exchange based hedge funds and other inside trading moguls, DO NOT REPORT what they find to the SEC. They argue, they lack the jurisdiction to do so. What, Congress never told them that they, as individuals, have a burdon to tell the SEC about crime they see? I beg to differ...but someone has to make the policy FORMAL. The Exchanges have been operating, at least since the 1933 1934 "act", with the understanding they are NOT to report investigations and evidence they see as to inside trading and other crime, to the SEC or any other agency. Can you believe this? ??

There needs to be a harmonization of reporting between FBI, SEC, US Attorney for each jurisdiction and the exchanges. How can you police white collar crime with no harmonization?

How can you police white collar crime without bounties to your own employees?

Congress should approve a 3-10 fold recovery system for the worst fraud cases, with a commission or sharing system to the employees involved in the detection and prosecution of inside trading.

Employees of public companies and their agents should be covered in a sweeping bill.

All these changes must be marked retroactive. No statute of limitations or other rule was ever intended to let insiders and their agents or what they will call "consultants" outright steal from the American public through stock trading.



Yeah, it's work. Hard work for you and for the Courts. Do you think the people who earned all those trillions of dollars did not work for it?

Is our system so callous it intends to rob people of their money and their life's work, all under the guise of "the Courts require finality" and (believe this or not) crooks who can complete a theft and keep it hidden are rewarded for this feat? That is what Statutes of Limitations are, absolutely, in the context of inside trading and stealing from investors.

Ask the lawyers who defend them. And in the final analysis, those very lawyers may like this change...when they stop and think about it. No statute of limitations and bounties for turning in inside trading crooks?



Are we going to do something about the real problem or leave the holes in the system, as they are?

As to the President's recent comments regarding overhaul of the financial watchdogs, Mr. President, nothing has changed in the details of the proposed agency responsibility shifts. Nothing. It's the same problem, with different agency names and the same "government workers". History repeats itself. Indeed. You had the SEC and they had the job to do, they failed. The OIG for the SEC failed as well.

Part of the problem is, no one cares about other people's money, just their own. But this too, can be addressed in a manner which serves all interests and honest intent. The paradigm shift you have to achieve is to charge those responsible for protecting investors with caring about THEIR (the investor's) STOLEN MONEY more than the government employee's own personal wealth. Not one of these proposals directly addresses the problem.

The problem is, the current state of the art of US law and regulation, favors crooks, the Courts side with them and no change I see, closes even the smallest hole now in existence.

The exchanges and how they operate, need to be utterly changed.

There is a need for a new agency, but with sweeping powers, to bring actions, to collect bounties and to share a reasonably significant part of the recovery with it's own investigational staff. Then, the stolen money from investors is of greater or at least equal interest, to those employees own personal investments and savings.

If an SEC employee is found who exploited inside information and traded on it, why do they continue to be employed? Why do they get a retirement at the expense of US Tax Payers? Clearly, there was some of this or why would the SEC broadly address the rules and regs and admit to loopholes? There were no loopholes. The very comment is intended to grandfather the thefts. It was legal for SEC employees to steal from investors through inside trading? I don't think so...

The Federal Government used to have the highest standards. Now, its own agencies jocky for power, trade on inside information with impunity, lobby Congress and act like children over the size of and uses for their own budget.
If one cannot see the problems in this, one cannot be a leader that will be remembered for anything at all.

The whole system requires a complete overhaul.

It starts with removing statutes of limitations specifically for rooting out criminal acts. Inside trading IS A CRIMINAL ACT but the civil right to investigate and act upon it, is stayed by our current laws. Where, in the Constitution was the quid pro quo? Right to protect property, right to bear arms? With a statute of limitations, meaning, if someone steals your property you have no rights....and to bear arms much less? Forget it.

So the new constitution reads, "you have a right to steal or have others steal from you, the theif will lie about it, hide the theft, hire lawyers who know this was done but will share what you stole to protect you, and the agencies who are charged with not letting this happen, they too trade on inside information and laugh at the victim. The victim then brings action in court, and the Judge tries to find a way to tell the victim that the the victim waited too long?"

This is our Constitution as it reads today. These are how private causes of action shamelessly unfold. The investor is tricked and victimized again. Ironically, no amendment can be found to support this. But it is true.

Which President will make note of this and address it?

When the PSLRA was passed, check former President Clinton's specific comments on that piece of legislation...what did he say? He is a lawyer, by the way, for those reading this commentary who did not happen to know this fact. As I recall, he said in essense, even the worst possible case of investor fraud would not make it to trial. He was right he knew....BRAVO Someone has a brain.

PSLRA and Dura v Broudo are nothing but successful lobbying of Congress, to add to the systemmic problem.

CRIME PAYS and is CONSTITUTIONAL. That is, in a nutshell, the current problem. Not the short uptick rule. Please....

The cry baby lobbying inclusive of the argument "investors who invest and loose will wholesale file these strike suits, to foist their losses upon public companies" is true. It is possible for the law to favor strike suits, where the law firms take most of any recovery, and public companies are saddled with more and more suits of this kind. But the PSLRA was passed in 1995 (as I recall?) and what happened then? The very worst. So that theory, was wrong. Strike suits were not the issue. Systemmic fraud without the civil right to police it, is the issue. So in retrospect, private causes of action do serve to help police the system, and indeed, the system was and is rife with fraud.

Add one more simple change. Those who bring what becomes obvious as a strike complaint, they too are guilty of financial fraud. eg Extortion, so make the penalties available to the judicial so they stick. Tell the Courts whosoever brings a baseless complaint against an entity for violation of US securities laws, rules, regs, faces ___, ___ and ___. Do this so appeals courts cannot reverse Sanctions and other actions needed to make sure investors do not abuse the right to bring suit.

The Courts and the Judicial bear a heavy burdon for this mess. They will not admit it, but they should not support PSLRA "raising of the pleading bar" if the real reason they support it is to make less work for themselves. This is a sloth-like and loathsom image and an image of impropriety.

SANCTION those law firms who brought baseless claims against public companies. How did Millberg Weiss get away with what they were doing? How?

Another issue within the courts involves the Supreme Court, in Dura, to put out an image which the Appeals Courts can pray to, and their true rationale is to make themselves look ripe for a potential move to the Supreme Court, as individuals. It is called "singing with the choir". Dura assumed the trading in stocks is mostly market driven, and frauds which occur are a small part of the stock price swing. So the whole thing grows to a fraud bubble and pops. Look back and look at the stock prices now. Do you think, maybe, that portion of stock price analysis in Dura WAS WRONG? If a particular public company is permitted to tell a wide string of lies spanning many years, how long does it take to deflate that stock's price? Market efficiency in the stock price and trading does not exist for a mostly false public company. So the Dura analysis was wrong, as it regards a company who tells mostly lies and commits the worst financial fraud. Why did the Supreme Court put its foot in its mouth, because this analysis fault is very obvious. And that is but one of the faulty analysis issues in Dura, contributing directly to this overall situation we have today. Will the Supreme Court take at least SOME responsiblity here? Food for thought... Which of our esteemed high Court Judges has stood out as an investor's advocate in this previous climate of tightening and closing all protections available to investors? Who? That is the point. We have a problem, and it's not small, or vested in only a few areas. The whole system is wrong and we need leadership to see it, address it and right it. Before it is too late...if not already. I do not think 50 million people who will now have to work an extra 20 years because of it, disagree.

Rome fell. Why? Maybe that is the real question.


Lawrence Glaser