June 25, 2023
Dear Members of the SEC:
I am writing to express my deep concerns regarding the proposed rule S7-06-22, which absurdly suggests granting voting rights to derivative holders in publicly traded companies. While I am well aware of the buzzwords like inclusivity and representation being thrown around, I strongly believe that this ill-conceived idea carries substantial risks that cannot be ignored. Allowing derivative holders to vote on company business opens the floodgates to speculative voting, conflicts of interest, dilution of voting power, unwarranted influence with minimal capital, and an open invitation for abuse. Frankly, the very notion is preposterous
Let's start with the issue of speculative voting. We all know that derivatives, be it options or futures contracts, are primarily instruments of short-term speculation, not long-term investments. The notion of granting voting rights to these transient entities is nothing short of madness. It is an invitation to prioritize immediate gains over the well-being and stability of the company, compromising its ability to make prudent decisions that align with long-term interests. Surely, we can all agree that such recklessness would have catastrophic consequences for both the company and its genuine shareholders.
Furthermore, the presence of conflicts of interest looms large and cannot be dismissed lightly. Derivative holders, with their peculiar strategies and short positions, often find themselves at odds with the objectives of traditional equity shareholders. Granting them voting rights would only serve to exacerbate these conflicts, rendering the decision-making process a farcical charade. We must not allow the voting rights of derivative holders to undermine the sacred fiduciary duty of the company and its management to act in the best interests of all shareholders.
As if that weren't enough, granting voting rights to derivative holders would undoubtedly dilute the influence of bona fide shareholders who have direct ownership of the company's stock. This dilution of voting power is a direct assault on the principles of fairness and equity. It erodes the ability of long-term shareholders to exercise their rightful say in corporate decisions and governance, leaving them voiceless and at the mercy of those who wield power without the genuine stake that comes with direct ownership. Is this the sort of skewed democracy the SEC wishes to endorse?
Let's not forget the injustice of increased voting power bestowed upon derivative holders with relatively meager capital. Thanks to the nature of derivative instruments, these individuals can control an excessive number of shares with a fraction of the capital required for direct stock ownership. This imbalance gives rise to an unconscionable concentration of voting power, enabling derivative holders to dominate decision-making processes far beyond their actual investment. Such a travesty undermines the interests of other shareholders and perpetuates an environment ripe for abuse.
Speaking of abuse, I shudder to think of the unscrupulous possibilities that lie ahead if derivative holders were granted voting rights. The leverage provided by options, coupled with reduced risk, would create a breeding ground for manipulation and strategic voting strategies. It would open the door for opportunists to exploit the system, strategically accumulating options positions solely to maximize their voting influence without committing substantial capital. If such a perversion were to occur, the very fabric of fairness and integrity within the voting process would be torn asunder, shattering the trust and confidence of market participants.
In light of these glaring and inexcusable concerns, I implore the Securities and Exchange Commission to abandon this ludicrous proposal. The potential risks and unintended consequences associated with granting derivative holders voting rights simply cannot be ignored or brushed aside in the name of ill-conceived inclusivity. It is paramount that we strike a balance between inclusivity and the stability and long-term interests of publicly traded companies and their genuine shareholders.
I sincerely hope that the Commission, in its wisdom, will carefully consider the gravity of the situation.