Subject: File No. 4-500
From: Thomas Braun, B.A., LL.B., LL.M.
Affiliation:

May 2, 2005

Dear Sirs:

It is obviously unfair for billion dollar hedge funds, like the one that the $60 billion Ontario Teachers Pension Fund has set up, to short OTC securities. The funds will not invest in start up companies but they have no problem destroying them. Most new jobs come from small business, and we need these start up companies to fuel growth and innovation. Every Fortune 500 company was once a start up. It makes me upset that regulators appear to do whatever big funds and investment banks tell them to due to their political power. The Pink Sheets proposed rule change does not go far enough, there should be an outright ban on short selling companies that trade on the OTC market because they do not have enough liquidity to survive these market attacks.

I would also add that sometime these are malicious attacks motivated by ill will. When a company turns down a powerful promoter or financier they have been known to retaliate by shorting the company's stock. These small thinly traded stocks can be easily manipulated by individuals who are competitors or people who realize that in this trading environment it is easier to make money by tearing something down than building it up.

The wealthy short seller is not assuming any economic risk when he can see that the stock is thinly traded with little depth of market. He can single handedly, or working with negative stock reporters, and chat group types, bring the stock down in a very short period. It becomes a self-fulfilling prophecy due to the lack of trading volume. Contrast this to short selling eBay for example. No one is rich enough to gang up on eBay because the stock trades about $50 million worth or more every day.

Once someone has built up their short position they will then do anything to make the stock go down. They launch personal attacks on the internet chat groups to assassinate characters, lodge false complaints with regulators, co-opt business reporters, defame the company to everyone they can talk to, etc. I have heard of Chicago or New York brokers with large short positions hiring Mafia thugs to force small companies to do a private placement with them to cover their position when companies organized shareholders to withdraw their stock from the DTC to corner the shorts.

I think it is shocking that the DTC and large brokerages lease their clients' stock without express permission, usually for as low as 1% interest. The short sellers drive the stock down more than 1% causing the investor/clients a loss. Isn't this a breach of thier fiduciary duty? Where is Elliott Spitzer when you need him?

I look forward to some action being taken.

Yours truly,

Thomas Braun, B.A., LL.B., LL.M.
Member, State Bar of California