Subject: File No. S7-12-06
From: J Cline

July 21, 2006


Thank you for this opportunity to comment on the proposed amendments to Regulation SHO.

Let me begin by saying that nowhere in the USA can you sell something you do not own and walk away with the profits. You are arrested and will probably serve a prison sentence for the crime.

Nowhere in the USA can you walk into a bank and walk out with .05% of the assets without being arrested and going to jail for the crime.

Nowhere in the USA is your record wiped clean of these transgressions prior to reiterating existing laws.

Granted these scenarios are dependent upon discovery and due process, but what we have are these scenarios, well studied and documented, and existing on a daily basis in our securities industry. Not only do they still exist, despite regulation, I believe that the existing regulation was to simply pacify investors while the egregious fraud of failure to deliver (FTD) continued. If it was working, you would not have companies listed on the SHO list for 300+ days. If we are to eliminate the fraud, we need to eliminate the platform, the tools and the loopholes which allow the fraud to persist.

Despite that you took the word "Integrity" out of your Congressional Mandate, there are investors who still desire to see integrity in our Capital Markets, and integrity of the regulators mandated to protect investors. There is not honor in protecting those committing the fraud. I am one of those investors who desires to see integrity return.

I find the exercise of correcting some of the inadequacies of Reg SHO quite easy actually.

You should never allow any naked short selling (stock counterfeiting) under ANY circumstance. This is outright theft and should be addressed by revoking licences and/or disbarrment to do business in the industry. There should be NO loophole (exemption) for anyone.

Broker/dealer/marketmakers need to borrow the shares of any stock being shorted (under any circumstance) BEFORE they allow the transaction. Just saying "locate it" gives no assurance that the stock will not be sold over and over again. Eliminate second and third parties to these transactions to further access fraudulent tactics.

Transparency is of the utmost importance. Therefore, the data on short postions should be available to the public on a monthly basis. Concurrently, the number of publically tradable shares of any company should be available to investors using the same time frame. There should be no secrets as to how many shares are available to trade and how many are being traded when public money is involved.

For too long the OTCBB/Pink markets have been ignored. It is where most of the fraud takes place. Stop ignoring it and beging to regulate it firmly.

I would like to see the "grandfather" clause revoked. Those who stole, and by the way keep on stealing, need to be accountable to investors.

Lastly, I would admonish you to return the word "Integrity" to your mandate. Integrity never hurt anyone...without it shame ensues. I implore you to act with honesty and integrity when addressing the changes that face you all.

Judy Cline