Subject: File No. S7-24-04
From: Dave Patch

October 31, 2004

Mr. Chairman, Commissioners,

In the release of Regulation SHO Director Market regulation Annette Nazareth and her team addressed the issues of naked shorting making claims that Regulation SHO would address all concerns. In the live Web Cast, this specific reform was also discussed and it was stated that his reform would not take place prior to Regulation SHO coming into play. I ask how you will define the success of regulation SHO before you consider this rule change.

On September 15, 2004 SEC asst. Director of Market Regulation James Brigagliano submitted a letter to Maryland Senator Paul Sarbanes answering questions about naked shorting. In the Senators request for answers one company, Jag Media holdings, Inc had documented e-mails of settlement failures that were dated April 2003. The SEC was supposed to address these failures. Mr. Brigaglianos response was in citing a June 2004 corporate action in which the company moved to custody-only trading to address these failures. It is this corpoate action that this proposed rule is attempting to stop. Were these firms clairvoyant in their pre-mature e-mails to the company or were the settlement failures of 2003 totally unrelated to the 2004 corporate action as presented and the response was a diversion? Those failures occurring under the SEC proposed method of operation.

I believe that before you can even consider this proposal the issue of the original e-mails must be addressed. Why do the April 2003 settlement failures identified by the Broker e-mails exist? Then, why did Mr. Brigagliano correlate the April 2003 failures to a June 2004 corporate action?

Is the SEC intent on hiding the realities of the market settlement system with this reform as it was clear the SEC letter to the Senator was intended to redirect the present system settlement problems to custody only trading?

Naked shorting has attributed to over 4 of all publicly traded companies being abused. This includes the 4 the SEC referenced in their release of regulation SHO plus the many others who folded under the abuse. The SECs own single enforcement action on illegal shorting came against Rhino Advisors yet the 1 million fine pales to the 500 Million lost in market capitalization. The SEC has also failed to go after the co-conspirators within the Industry that allowed Rhino to conduct this operation of abuse.

The SEC should not be allowed to make any further changes against small companies seeking self-help measures until they can show clear success in stopping the abuse.

The SEC should be forced to provide monthly settlement failure reports to the public of the threshold companies listing the companies, the percent of float unsettled, and the duration of time on each company has been on the list. The SEC should insure that NO COMPANY remains above this threshold for greater than 30 days.

The SEC should make public a report of the present value of unsettled trades for the threshold companies and should provide a cost analysis of what it would cost to guarantee close-out of these trades within 30 days.

If the charter of the SEC is to protect the investing public than the SEC must be restricted from making harassing and retaliatory reforms against those who have been provided less than suitable protection. The SEC must show their own levels of transparency so that we can all see where the true agenda of the SEC lies. Mis-staing the facts surrounding those e-mails is a clear sign that an agenda is in play and it is not to the best interests of the investing public.