Subject: File No. S7-12-06
From: Adam Hasner

September 19, 2006

The Honorable Christopher Cox, Chairman
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549

Re: File No. S7-12-06
Proposed Amendments to Regulation SHO

Dear Chairman Cox:

As a member of The Florida House of Representatives, I am writing to express my concerns regarding the impact that abusive naked short selling has on our capital markets, public companies, and innocent shareholders. While I commend the SEC's proposals to amend Regulation SHO by repealing the grandfather provision and narrowing the options market maker exception, I do not believe that these proposals go far enough to stop the persistent "fails to deliver" and other associated abuses. Thus, I welcome this opportunity to provide further suggestions for modifications to Regulation SHO.

  1. Transparency – Disclose the Volume of Fails. The SEC should amend Regulation SHO so that the aggregate volume of failures to deliver is reported daily for each threshold security. I agree with Commissioner Atkins' statement that aggregate fail data should be disclosed. Greater transparency will result in the elimination of abuses and will bolster investor confidence and security. Without this full disclosure, it is difficult to know the level of "naked shorting" and its risk to the capital markets.
  2. Ownership – Require a Pre-Borrow for All Short Sales. The SEC should require that before any seller can short sell a stock, that seller must either have the stock in his possession (and have the right to sell it) or have entered into a bona fide contract to borrow the stock in advance of the sale. This step alone should prevent the majority of purposeful and strategic fails to deliver. The current rules that allow the stock to be located (but not borrowed) create an environment where shares can be "located" multiple times without actually ever being borrowed. These loose rules allow abusive short-sellers to frequently never deliver stocks they sell, but rather postpone trade closures indefinitely.

The SEC must continue its efforts to protect innocent investors and public companies by minimizing the purposeful manipulation of our capital markets. The interests of abusive short-selling hedge funds must not be placed ahead of investors and employees who depend on these companies for their livelihood and retirement.

Thank you for your consideration.


Adam Hasner
Florida State Representative, District 87
33 NE 4th Ave.
Delray Beach, FL 33483