Subject: File No. S7-3-98
Date:    4/24/98 11:14 AM
     
     
To The Commission:
     
     This letter is written in response to proposed changes to rule 15c2-11.
     
     As an attorney who has represented numerous start-up and development
stage companies for over ten years, I am particularly sensitized to issues 
affecting the capital formation opportunities available to those types of 
companies.  Some government officials estimate that over 80% of our country's 
GNP is derived from small business enterprises.  As anyone in business knows, 
the commencement, and development, of a business requires inital captial, 
followed by expansion capital.  
     
     For most of these companies, banks do not play a meaningful roll in the
developing lives of these businesses.  As the old addage goes, a bank won't 
make a loan unless you don't need the money.  Captial for growth and 
development, therefore, is "risk capital" provided initially by the owners, 
then relatives, then friends, customers, and then those who may have had no 
prior affiliate with the business.  As the affiliation with the business 
becomes more extended, the prospective investor comes to demand something more 
to minimize  his/her risk - liquidity.  As a prospective investor seeks advice 
from an accountant or attorney, that professional will advise "don't be a 
minority shareholder in a privately-held business."  Hence, the large demand 
for "being public." 
     
     The mere fact that a company is publicly-held and is listed on the OTC
Bulletin Board provides additional comfort to both the prospective investor 
and the business.  This is because assuming the business does succeed, then 
liquidity for the investment has an opportunity to develop.  If the business 
fails completely, liquidity or the lack thereof will not be a significant 
factor.  So, the advantage of businesses and shareholders to have a stock 
quoted  exist even if the business has no revenue and losing money, or has 
revenue and is losing money, or has no revenue and is making no money, or has 
revenue with some profits.  The participants are looking forward to the 
evenutual success, even though that may take months, or years.
     
    I am repeatedly dissapointed that SEC staff members fail to grasp the
basic concepts that drive the desire, and need, to be public.  There is a 
tremendous difference in the ability to raise capital.  A private placement 
for a public company that is thinly traded is still much, much easier than for 
a private company.   And, most of these public companies WILL FAIL.  A 
majority of small businesses fail - that is nothing new.  The SEC, however, 
seems to believe that the failure of a business inherently involves fraud and 
deceipt.  That is simply not the case and the SEC  should not attempt to 
guarantee the success of every venture - because they can't.    Businesses 
succeed or fail for reasons far beyond the control of the SEC, with the 
exception of one - access to capital markets.
     
     The statutes, rules, and regulations of the Securities Act of 1933, and
the Exchange Act of 1934, are founded upon the principles of full disclosure - 
not merit review by federal bureaucrats.  Every attempt to coddle investors 
inherently creates greater dependancy upon the government for further "light 
and knowledge."  Investor education efforts by the SEC would be better focused 
on educating investors about how it is their responsibility, in associate with 
their right to invest in any venture, to gain proper information that they 
will rely on prior to investment.
     
     Brokers are already under constraints of "know your customer" rules and
companies are also under many, many anti-fraud provisions.  Additional 
regulations do  not deter idividuals that are determined to commit fraud. 
Such regulations only damage the already limited opportunities for small 
business to develop.
     
     The proposed changes to Rule 15c2-11, like many government regulations,
may be well intentioned, but the damage to small business capital formation 
and markets would be substantial.  The practical effect would be to force 
firms from not making any markets in any companies that are not listed on 
NASDAQ.  Requiring the brokers to make determinations as to the accuracy of 
15c2-11 information is a manna from heaven for the Plaintiff's Bar - which 
means firms will make the decision to not make market in small issues.
     
     The reasons for not adopting the 1991 proposed amendments remain the same
today - and even more so.  We now live in a world wherein computers and the 
internet are creating access to more and more information about companies - 
regardless of what the SEC requires or does not require.  Transactional costs 
are decreasing for smaller investors.  Interest in small and speculative (most 
likely redundant terms) stocks is increasing.  If people want to invest, they 
should be allowed.  There are plenty of rules and regulations to effect the 
conduct of honest issuers and brokerage firms; and there are plenty of rules 
and regulations to punish the dishonest issuers and brokerage firms.  
     
     I respectfully voice my opinion that the proposed amendments, if adopted,
would cause substantial harm to small businesses throughout the country.  I do 
not believe that is the result congress, nor the citizens of this country that 
depend on small businesses, desire.