Subject: S7-01-17
From: Michael Hess

September 27, 2019

To whom it may concern, 

I am writing to the SEC to express our opposition to the recently proposed rule changes to Exchange Act Rule 15c2-12. 

The SEC appears to be trying to prevent fraud by reducing or eliminating trading of securities in companies who do not publish current financials.  In order to accomplish this goal, the SEC is targeting those who make a market in these types of securities by forcing these market makers to cease the processing of trades in companies which do not publish current financials.  This is a backwards approach to solving a problem.   

The SEC should instead require that companies publish their annual financials if their securities are traded over the counter.  Many small companies have de-listed their securities from major exchanges to avoid the large cost of complying with the expensive requirements of publishing audited quarterly financials.  It would not be a burden, however, if these companies were to be required to publish unaudited annual financials on their websites or on the otcbb website.  Companies need to track their annual numbers for a myriad of reasons, such as for tax reporting requirements, and therefore these numbers are easily available. 

By taking the SEC's backwards approach, current investors will simply become trapped in their investments in these companies; they will be unable to buy and sell their securities.  In order to avoid this trap, these investors may feel compelled to sell their securities at severely depressed values before these rule changes take effect, or even worse, may feel compelled to sell their securities at rock bottom prices after no bids and offers are allowed.   

In summary, the proposed rule changes "protect" new investors from making investments, but radically harm current investors unnecessarily.  Please do not enact the currently proposed rule changes. Instead, please consider a rule that companies must publish, in some form, their annual financials.   


Michael Hess