From: jcline03@comcast.net Sent: Friday, January 02, 2004 10:11 AM To: rule-comments@sec.gov Cc: senator_murray@murray.senate.gov; Robert.Glauber@nasd.com; president@whitehouse.gov; Nazaretha@sec.gov; Mary.Schapiro@nasd.com; eliot.spitzer@oag.state.ny.us; cutlers@sec.gov; chairmanoffice@sec.gov; AskDOJ@usdoj.gov Subject: Re: File # S7-23-03 Securities and Exchange Commission: 450 Fifth Street, NW Washington, D.C. 20549-0609 Re: File # S7-23-03 Addendum: Dear Mr. Katz, Thank you for allowing me an addendum to my first letter regarding Reg. SHO. There is a debt owed to investors. That debt is in the trillions of dollars due to naked short selling of the Microcap Market. There are huge open positions that, by law, require the broker/dealers to "BUY- IN". The very introduction to the SEC website states the SEC is "The Investor's Advocate" It goes on to explain "How the SEC Protects Investors and Maintains Market Integrity." Is there any honor and integrity in allowing the continued abuse, theft, and corruption in ANY market in the USA? The way Reg. SHO is written at the present time, it allows just that! You say your goals are even more compelling because "first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college". I dare say many investors have lost that over and over again. You also say in your introduction that you "oversee broker/dealers." Broker/ dealers owe the investor a fiduciary duty of care. Can you explain why you then allow these broker/dealers to have massive open positions (300-400% found in discoveries in civil cases now before the courts)? Has the SEC not failed that duty? By ignoring unsettled trades, does this not simply allow the present fraud to continue unhindered? The investor has been basically "sold out" by his own brokerage firm. The fact that a company is less developed should NOT give license to theft by the broker/dealer. How will the investor be protected if the new regulation does not provide for a settlement of all trades in all companies, and buy-in's for failed trade settlement as mandated by SEC/NASD rulings? It is "affirmative determination" in writing of the "borrowability" of legitimate "shares/packages of rights" that allows the process to have integrity. The entities being sold in may of these stocks simply do not exist. They are counterfeit. Some investors that prefer microcap investments to the large, mid and small cap stocks as they can provide greater returns upon the success of the company in which they choose to invest. "Regulation" then, must apply across the board! If not, the SEC is guilty of creating a "class system" of investing in which some investors are not worthy of protection. In several places, the 1934 Securities Act instructs the SEC to "buy-in under a guaranteed delivery basis" shares which fall into the "open position" category. These include shares for which "good delivery" was either never made or in which "good delivery" was effected by a borrowed share that was not returned in a timely manner. Why is it that this MOST IMPORTANT ACT is not being carried out by the SEC and NASD? What Reg. SHO must do: 1. Force ALL corporations to make public their current number of shares issued and outstanding if they want access to the "safe harbor" provided by the "restricted lists". It is a necessity to be able to calculate the one half of 1% threshold value for protection from further naked short selling. 2. Order all broker/dealers to buy in on existing open positions. Make this applicable to reporting and non-reporting companies. The burden needs to be on the perpetrator of the fraud, not the victim. 3. Enforce affirmative determination. If you are going to address the fraud in the microcap market, then go after it and eliminate it, not allow it to continue. Remember ...your goal is the protection of ALL investors , not SOME. YOU ARE "THE INVESTOR'S ADVOCATE."