Subject: File No. S7-12-06
From: Vaughn R Call, Ph.D.
Affiliation: Professor of Sociology, Brigham Young University

April 30, 2007

Ms. Nancy M. Morris
U.S. Securities and Exchange Commission

RE: File: S7-12-06, comment on Regulation SHO

I support the SEC's proposal to eliminate the "grandfather provision" and to further restrict the closeout requirement for the market maker exception. Quite frankly, I think even more stringent restrictions need to be made to eliminate naked short selling. I strongly support the proposals made by Michael J. Ryan, Jr. (U.S. Chamber of Commerce) in his comments on April 26, 2007.

Naked shorting is one of the most blatant and common form of securities fraud. Please do more to penalize naked-shorting and actively investigate (and prosecute)investors and firms that engage in naked-short selling.

The effects of naked-short selling are particularly damaging to small cap stocks. All short-selling should be banned on stocks trades under $5. A hedge fund or large investor can short-sell the stock of a small company and "legally" manipulate the stock price. The ordinary investor doesn't stand a chance investing in emerging companies. Computerized information sources provide market makers and large investors access to stop-limit orders. They short small stocks enough to reach the stop-limit orders. The computerized stop-limit orders are activated until the short-seller has wiped out the stop-limit orders. This practice drives the price down sharply. The average investor doesn't have any protection from this practice. I have seen it happen numerous times and no longer use stop-limit orders for that reason.

Ordinary investors like myself are losing confidence in the integrity of the U.S.stock market. On bulletin boards the more seasoned investors are warning other investors to not follow IBD's advice to set stop-limit orders (IBD isn't the only group doing this). We see these stop-limit orders being taken out on a daily basis. Instead of a mechanism to avoid stock losses for average investors who can't monitor their stocks on a daily basis, the large investors are using stop-limit orders to wipe out the average investors.

The electronic era has made manipulation and fraud too easy. It is time for the SEC to immediately take even more action than is proposed in the current SHO regulation changes.

I encourage you to act quickly. The average investor is being ripped off.


Vaughn R.A. Call, Professor