From: Lori Livingston
Sent: June 2, 2005
Subject: File No. 4-500

Although this letter originally was sent to the S.E.C. as my reaction to the DTC press release regarding the changes to Delaware law regarding the elimination of stock certificates, I think it also directly applies to R. Cromwell Coulson's, Chairman and CEO's of Pink Sheets, petition to the SEC to cause the amendment of NASD Rule 3360 and require NASD broker dealers to maintain a record of total "short" positions in all customer and proprietary firm accounts in all publicly traded equity securities as well as report this information to the NASD for public dissemination of the short positions by security.

The text which appears below was sent on May 27th to the S.E.C. as well as Transfer Online's issuer/clients, and the industry professionals who support them, based on my concerns surrounding the continuing trend of the movement of securities from the books and records of the corporations to books and records of the Depository Trust Company ("DTC") which directly connects to the problems brought forth in this petition. I respectfully submit my original letter of May 27th for your review and consideration in your decision making process.

Original text follows:

From: Lori Livingston
Sent: Friday, May 27, 2005 3:26 PM
Subject: Elimination of Stock Certificates

To whom it may concern:

I am writing in regard to the recent press release from the Depository Trust Company (DTC) and other recent events and rules regarding DTC eligibility and Issuer rights in regard to DTC participation.

As someone who has been in the transfer agent business for 23 years, I am alarmed by recent developments and trends that all work toward a system of increasing positions on the books and records of corporations in the name of Cede & Co. (nominee name for DTC). As the transfer agent for approximately 300 issuers, I am increasingly contacted by these companies as they seek information regarding the stock ownership in their companies and the underlying trading of those shares in the market. Over the years as the amount of shares held at DTC has increased it has become more and more difficult to determine who owns the shares, who is trading them and if the trading is proper. This trend, and the resulting problems I will detail below, continues to increase because a minority of the total number of shareholders are reflected on the books and records of the corporation, most activity takes place behind the wall of ownership that is designated as Cede & Co. and neither the company nor the transfer agent has any access to the underlying information.

While the press release (which I have attached) heralds the movement toward increasing this trend of dematerialization as a triumph and great progress which will save investors millions of dollars, I see this trend from a different perspective and one which is not only alarming to me but to many of the companies that will be effected by these changes. I also disagree as to whether or not it will save shareholders millions of dollars or merely shift the costs through a different route and into different pockets. Additionally, I see this as continuing the trend of increasing costs to corporations, particularly smaller issuers already struggling with the ever increasing price of being a public company, and further decreased shareholder value based on the additional expense paid by the company.

Furthermore, DTC recently managed to put through a rule change (Release No. 34-50758A; File No.S7-24-04) that prohibits a transfer agent from representing any company who seeks to withdraw from the DTC system. This change effectively leaves companies with no voice or choice in the management of their stock and their ability to have any transparency as to what is actually taking place in the market in regard to their stock.

I receive calls from companies seeking information as they watch millions of shares trade in a single day, who watch their share price decrease in value and who have no access to information regarding who is behind the trading of these shares, or if in fact the trades are at all legitimate. As the system now operates, most companies have a large percentage of shares on their books registered to Cede & Co. This position usually represents a majority of the outstanding stock in any given company. Underlying this position is a system at DTC which is reflected in a Position Listing Report and this report represents the brokers and clearing firms that hold positions in any given security on DTC's books and records for the beneficial owners (Non Objecting Beneficial Owners NOBOs and Objecting Beneficial Owners OBOs) or shareholders. The trades that take place on a daily basis move between these brokers and clearing firms electronically; however, the Issuer (nor their transfer agent) has any access to this data unless they order and pay for the lists. This is not only expensive for the company, but it also does not tell them anything about who actually owns the stock. For that information they must go to yet another party and that is ADP.

ADP is engaged by the brokers to keep track of the NOBOs and OBOs and to send the shareholders in Street Name reports and communications from the Issuer. Their other vital function is to serve as proxy tabulator for the shareholders who hold their shares in broker accounts. This is a critical function for the public company and one which they are required to perform by law. Given the importance of shareholder voting and communication one would assume that the same requirements placed on transfer agents as to accuracy and reporting would be placed on ADP and Cede & Co. as they usually hold or service the majority of the shares owned in any given company. I have found; however, that when presented with the tabulation reports from ADP the share totals they report sometimes exceed the total number of shares outstanding for the company. Let me restate this because it is a very important part of my concern about a system that is more and more headed in the direction of increased control by DTC. The shares presented by ADP, that are the shares voted by the brokers on behalf of the shareholders for whom they hold accounts, EXCEED when added to the shareholders of record the total number of shares outstanding. As the final judge and inspector of elections I would naturally inquire as to how the number of shares could be higher than the total shares that exist for a company and to my surprise I am told by ADP that they only vote what is reported by the brokers. It becomes the responsibility of the company, and further the transfer agent, to reconcile the numbers so that an annual meeting can be conducted that reflects numbers of share voted that makes any sense.

Where are these extra shares coming from? Why are there no controls on the number of shares held in the nominee name Cede & Co. vs. the ownership on the books and records of the brokers and why is the company not privy to any information unless it pays whatever fees it is told it must pay by the organizations that control the data? There have been a great deal of new regulatory levels of reporting put on companies (i.e. Sarbanes- Oxley Act compliance), but from where I am positioned in the marketplace that does not address what is a far greater problem for issuers shareholders and the integrity of the markets, and that is, who are their shareholders and how are their shares trading?

I will close at this point with a request to the SEC that in the rush to move to dematerialization someone look at the existing system and the inequities that exist in the market based on a companies complete ignorance and inability to know what is actually going on with the shares of their companies and the problems we face in the future as we move toward a system where the brokers, DTC and ADP have more information and control than the shareholders, the transfer agents and the issuers. In fact, as the system is evolving, DTC is de facto becoming the largest transfer agent in the industry even though it is an organization formed by and working for the interests of the brokerage community. If, ultimately, the S.E.C. is in place to protect investors then this issue can not be ignored because in the end when the market is completely under the control of the brokers and the organizations that represent them then the market can neither be transparent nor fair.

I thank you for your time in reading this communication.

Lori Livingston
President & CEO
Transfer Online, Inc