Subject: File No. S7-12-06
From: Thomas P Vlasic

January 20, 2007

House Financial Services Committee via fax 202-225-6952
Senate Judiciary Committee via fax 202-224-9516
Senate Banking Committee via fax 202-224-5137

Re: Part VI SEC 17 CFR Part 242 grandfather clause = COUNTERFEIT SECURITIES IN THE MARKET PUSUANT TO rule 203 (b)(3)(i) under Regulation SHO.

The above-referenced rule, an exception to the mandatory close-out rule, exempted all failed short sale trades, prior to January 03, 2005, from being closed out. In other words, the trades were exempted from ever having to be settled. In other words, the shares sold short against un-borrowed shares were transformed into counterfeit shares circulating in the marketplace.

The SEC has committed a felony in implementing rule 203(b)(3)(i) by exempting all short sale trades from being settled prior to January 03, 2005.

Dear Sir/Madam:

The SEC website ( states The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
Furthermore, the SEC website states The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.

The SEC has no authority to turn failures-to-deliver prior to January 03, 2005 into counterfeit securities by grandfathering failures-to-deliver into the marketplace. It is imperative that the SEC eliminate the "grandfather" clause from Regulation SHO immediately and enforce Regulation SHO as it was meant to be enforced.

The SEC has received over 300 comments in response to eliminating the felonious illegal grandfather clause and is wasting their time by putting off a vote on eliminating this clause. The clause in itself is a felony and must be eliminated.

When a person or entity engages in a crime by selling that which they do not own and have not borrowed, that person or entity must also accept the consequences of buying back what they had no right to sell in the first place. How does the SEC protect investors when this grandfather clause protects the naked short sellers (failures to deliver)? Is this not fraud allowing failures to deliver not being covered?

No further statistics regarding Regulation SHO are necessary. Regulation 203(b)(3)(i) is an illegal exception to the mandatory close out rule. I am surprised that the SEC is having difficulty comprehending the obvious.

The SEC has become guilty of counterfeiting and subject to RICO charges the moment the SEC had the audacity to transform failures-to-deliver into counterfeit securities by exempting the inevitable failures-to-deliver, prior to January 03, 2005 from being closed out. It appears that there are 1000's of investors with more intelligence then the SEC enforcement division and its division of market regulation.

Comments that the SEC has requested regarding the elimination of the "grandfather" clause ended on September 19th, 2006 and should have been voted on during the SEC's December 4th, 2006 Sunshine Meeting. Putting off action until 2007 is inexcusable.

It is now time for action and remove this acidic clause from Regulation SHO to preserve the integrity of our markets.


Thomas P. Vlasic

Hon. Christopher Cox, Chairman via fax (202)-772-9200
Hon. Paul Atkins, Commissioner via fax (202) 772-9330
Hon. Roel Campos, Commissioner via fax (202) 772-9335
Hon. Annette Nazareth, Commissioner via fax (202) 772-9340
Hon. Kathleen Casey, Commissioner via fax (202) 772-9345
Dr. Erik Sirri, Director, Division of Market Regulation via fax (202)-772-9273
Dan Gallagher via fax (202) 772-9330

Washington Post NY Bureau:
Richard Drezen 212-445-4853 via fax
Michael Powell 212-445-4853 via fax
Joe Becker 212-445-4853 via fax