Subject: File No. S7-19-07
From: Walter I. Hesse

July 9, 2008

Dear Chairman Cox,

Ms. Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F. Street, NE
Washington, DC 20549-1090

Re: Comments on Proposed Amendments to Regulation SHO
File No S7-19-07

Dear Secretary Morris:

Thank you for the opportunity to provide comments on the Commissions proposed amendments to Regulation SHO. I am a investor in several pink sheet companies that frequently have turned up on the SHO list for weeks and MANY months at a time. I fully realize the speculative risk involved, but also realize that there is manipulation that is not being addressed by this regulation. The term "naked short" does not fully describe the act of counterfeiting of stock certificates and back office trades that are off the record for the purpose of short sales between marketmakers and brokers to force down or hold the price of a stock while they manufacture negative information for release.

I have witnessed multiples of outstanding shares traded on several issues in one single day, realizing that there may be extreme volatility in them, but this should only be true if they are not privately held and out of the short pool.
Providing liquidity is normal in the market, but this is clearly manipulation of the worst kind and violates the intent if not the rules of the act of 1934.

I fully support the proposed elimination of Regulation SHOs options market maker exemption and encourage whatever steps are needed to accomplish this change as expeditiously as possible.
The exemption for options market makers is a obvious tool of manipulation and must be eliminated promptly to ensure a level playing field for public companies and shareholders.

I commend the Commissions recent action to strengthen Regulation SHO through the elimination of Regulation SHOs grandfather provision. I am also pleased that over the past several months that Chairman Cox has personally spoken about the abuses of naked short selling and the need to end this manipulative practice. However, I remain concerned that, despite the Commissions recent efforts and Chairman Coxs public comments, these abuses continue.

While the elimination of the options market maker exception and the grandfather provision will significantly strengthen Regulation SHO, these changes alone will not adequately solve the problem that results in continued naked short selling and failures-to-deliver. I request that the Commission (1) impose in Regulation SHO a requirement of a firm location of shares to be borrowed before a short sale can be executed, and (2) enable transparency by requiring timely disclosure of the volume of failures-to-deliver shares of companies on the Regulation SHO threshold list. The Commission should issue and complete promptly a notice of proposed rulemaking to implement these two critical components of effective Regulation SHO reform.


Walter Hesse
Hanover, Minnesota