Merit Capital Associates, Inc.
1221 Post Road East                                                 Westport, CT   06880 
tel: (203) 341-3500 (800)882-2889
fax: (203) 341-3515

Member  NASD  SIPC                                                Investment Bankers / Brokers

Russell W. Newton


April 6, 1998

Jonathan G. Katz                        Via E-Mail:

Secretary, Securities and Exchange Commission

450 Fifth Street, NW

Washington, DC 20549

Via E-Mail:

RE: File No. S7-5-99

Dear Sir:

I am writing you to comment on the proposed rules regarding market makers in Bulletin Board stocks. As Chairman of a small Broker/Dealer, these rules are of great concern to us. The implementation of these rules would force us to no longer make markets in any Bulletin Board stocks, and in all likelihood would have the same effect on any legitimate Broker/Dealer (big or small). This of course would either cause the Bulletin Board to wither and die, or become the vehicle of choice for the less desirable participants in our business.

The ripple effects of either of the two likely scenarios mentioned above would be disastrous for the majority of small companies that need the access to capital that the Bulletin Board provides. This could prove to be of great impact to our economy going forward. We would urge very careful study of all the ramifications of these rule changes before they are allowed to be implemented.

Merit Capital has always done less than 5% of it's business in Bulletin Board stocks, so the potential impact on our business is small. However, over 75% of the investment banking proposals we see would fall onto the Bulletin Board. Small companies typically need small Broker/Dealers and the Bulletin Board in order to start their public lives. Without this area of fertile growth, the growth chain that has driven our economy could be greatly damaged.

While we certainly support the motives behind the proposed rule changes, it appears that the suggested medicine would actually kill the patient. Please take all of these facts into consideration before changing the rules in the manner you propose. We oppose the rule changes as they currently stand, a respectfully suggest that there are other ways to achieve your goals without eliminating a much needed source of capital for small companies.


Russell W. Newton

Russell W. Newton