Subject: File No. S7-19-07
From: Gary Rupp
Affiliation: Citizen

July 16, 2008

For two years now many investors have written your office frequently about the disaster that has occurred within our financial markets due to the illegal practice of "Naked Short Selling" (NSS). Moreover, myself and others have written about the failure of the SEC to impose the laws that are already on the books that would otherwise punish those who use this tactic to beat down companies for their own financial gain.

We are now seeing an absolute disaster... one that could take down many of our largest financial institutions and investment banks... due to this illegal practice... and the failure of the SEC to enforce laws that are already on their books.

This is totally unacceptable. Only now do we see the SEC's Chairman, Christopher Cox, going on TV to tell everyone that Naked Short Selling against failing banks, such as Fannie Mae and Freddie Mac, will not be allowed. Well, guess what... that practice is already illegal. Why isn't the SEC enforcing the existing laws that require covering "Failures to Deliver" (FTD)?

And, while they are at it, they should enforce those laws across the board... not just those who perpetrate this crime against financial institutions and banks.

Even Jim Cramer's is calling the SEC out on this subject. (Mad Money, CNBC - Tues. Jul. 15 2008)

The fact is, large Hedge Funds and Investment Banking firms realized long ago that the DTCC and the SEC were not enforcing the rules against Failures to Deliver (FTD)... and it's very apparent that those same Hedge Funds and Investment Banks have targeted firms to drive down their share price through Naked Shorting. e.g. shorting a stock without actually borrowing the shares first.

In the process, these large Hedge Funds and Investment Banking firms have made extravagant profits while severely damaging hundreds, and some analysts think it's actually thousands of companies. Many of the targeted companies have failed due to targeted attackes by Naked Short Sellers, just as the SEC fears will happen to Freddie Mac and Fannie Mae... and just like what happened to Bear Stearns... taking American jobs and investor wealth with them in the process.

In addition, since many of these firms operate outside the US, they are taking their illicit gains out of the country. Moreover, Naked Short Sellers are are able to keep the entire income derived from their "illegal" short sale. This is because current laws do not require short sellers to have to make good on their Fails to Deliver (FTD) when the targeted company goes out of business, nor do they have to report the income.

This issue is the most important issue in front of the SEC. Please work with your colleagues to stop Naked Shorting in all forms, and hold the firms and investors who practice Naked Short Selling accountable for their actions.

The bottom line is... The Congress, Senate and the SEC needs to get on top of this. The practice of NSS is pervasive... and the SEC has done nothing to stop it. Moreover, the SEC has known about this problem for some time. (See puclish FTD lists, Overstock, CMKX, and many, many other firms that have cried foul.)

Enough with the Comment Periods. Enough with talking about the need for Liquidity in the markets. That's just an excuse that Naked Shorters have latched onto. The SEC needs to take action, and should be held accountable to investors for their past failures. We need to go to T+3 settlement periods, just as the European markets have done. And, short sellers need to "Buy-in" when they fail to deliver.

- Gary