Subject: Proposal #S7-24-99
Author:  "RQuiel" 
Date:    12/22/1999 11:55 AM
     
     
    I am writing this letter to inform you of my opinion regarding the issue of
approving the shorting of small cap, bulletin board and pink sheets stocks.  I 
am opposed to any move on the part of the SEC to allow shorting of the above 
stocks.  There are a number of inherent problems in allowing the shorting of 
these stocks.  First of all the stocks are non-marginable and certainly not 
approved by the banking industry for hypothecation.  Reg. T of the banking 
industry would have to be rewritten if these stocks were allowed to be margined.
 I would like to borrow money against these stocks from the bank, however, I
believe the Banks would shudder at the thought of loaning money with these 
stocks as collateral.
     
    Second, shorting of these stocks is currently allowed in two areas.  One
area of legal shorting is market makers.  I believe the practice of shorting by 
market makers should be abolished or greatly reduced.  Currently, abusive short 
selling to the point of market manipulation is allowed and not monitored.  There
should be severe penalties for market makers conducting abusive short selling. 
Another area of shorting occurs in other countries for the aforementioned 
stocks.  As an example, some brokerage firms in Canada allow customers to open 
accounts for the sole purpose of naked shorting.  One firm that I know of 
personally, allows customer's to deposit 200% of the money for the cost of the 
shares and naked short that amount of stock.  Credit against the 200% is givin 
for the sale of the stock.  This must be allowed by the Canadian Securities Laws
and therefore not subject to US Securities Law.  Since, you are not empowered to
change their laws, they are allowed to short stocks on a wholesale basis.  I am 
currently involved with a case of naked shorting out of Canada and would be 
happy to explain what's happening in that case.  The real problem is the lack of
enforcement by the SEC in this country of rules that currently exist. 
Currently, US Market Makers are not allowed, by the rules, to accept naked 
shorting of non-marginable securities.  However, they do it all the time with 
impunity.  The NASD should require that the rules be enforced on the market 
maker's.  The NASD approved Canadian brokerage ACT input.  In other words, the 
NASD allows Canadian Brokerage firms to sell stock to US Market Maker's and 
input an ACT confirmation.  It is my understanding from the Head of Market 
Surveillance with NASDAQ that the Canadians must follow US Securities laws in 
order to be allowed to input ACT confirmations for US Securities.  If that is 
true, then why are the Canadians allowed to input ACT trades without declaring 
that the stock is being shorted, the way it is done in the US.  It seems that 
the NASDAQ system allows the breaking of the rules.  What is even worse, the 
person I spoke with at NASDAQ, didn't even understand the rules.
     
    Therefore, we do not need to change the law with regard to shorting
non-marginable securities.  We need to step up enforcement of existing laws to 
not allow us market maker's to accept sales of stock that being shorted.
     
    The other area of problem exists with the Depository Trust Company, New
York.  The DTC protects their members who short non-marginable stock and in some
instances loan the offenders the stock.  A closer eye should be kept on the 
activities of the DTC.  Under the rules non-market maker's are required to 
deliver stock within 10 days of sale.  That rule is never enforced.  If the SEC 
enforced the rules on delivery, that would cause the shorter's a lot of grief. 
It is all a sham.  Enforcement is the ony way to solve the problems of the small
cap market.  Shorting should never be allowed, because of the hardships imposed 
on small companies for raising capital.  The shorts know this and when they 
short they go out to the Media and internet and bash the companies to put fear 
into the small investor and have him sell his stock generally at a loss.  The 
system can be cleaned up with enforcement of current rules.
     
Thank You,
Robert Quiel
79013 Bayside Ct.
Indio, Ca. 92201