October 4, 2005

Subject: 265-23:


I am an investor in a small cap stock Novastar Financial, Inc, ticker symbol NFI. I believe that extensive naked short selling of NFI shares has occurred. This is illegal but the law is not being enforced.

I am one of Fidelity's customer's eligible for their Active Trader Pro website which allows me real-time watching of trades. NFI is never available to short on Fidelity's screen because they apparently adhere to the law regarding the SHO list. Yet, I have watched the short interest on NFI grow from 7 million shares to almost 9 million shares.

It appears to me that the SEC is not enforcing the law which prohibits naked shorting, at least in the case of NFI. This has allowed institutions, market makers, and hedge funds to naked short the stock without having to by back in their shorts. This has diluted the number of shares in circulation further depressing the stock price.

Each week I see visible manipulations on my "time & sales" real time screen provided by Fidelity. When the ask shows up well below the current bid and last sale and is executed immediately in large round blocks I am immediately suspicious. This is particularly evident near the close of the trading day. I have tried to take advantage of those low price closing trades but my buy never executes. Further, the practice of past posting the last trade of the day at $.15 - $.25 below the real 4:00 PM trade further helps the illegal shorters as it seems the following opening price always keys off of the prior listed close.

The SEC has allowed the big boys to take advantage of the retail investor in this regard. The SEC has the power to enforce this naked shorting and "painting of the tape" at the day's close. Actually, it is your duty to enforce the law. I would encourage you to renew your efforts to stop this crime being committed against the retail investor.

Thank you in advance.

Mr. Robin Lisk
Bend, Oregon