Jan. 3, 2023
January 3, 2023 Dear Securities and Exchange Commission, I am writing as a small investor to express my support for the proposed rules 15Fh-4, Rule 9j-1, Rule 10B-1, and Schedule 10B. As a retail investor, I am often at a disadvantage when it comes to the equity market as a result of the security-based swap market, and I believe that these proposed rules will help reduce the murkiness of the equity markets which creates a systemic advantage against me and other small investors. The proposed Rule 15Fh-4 should include all officers and decision-makers / stakeholders because fraudulent / coercive actions can be undertaken at any level and are illegal. It should also include traders and those who might execute these swaps against the better judgement / goals of the firm they represent in anticipation of returns based on fraudulent manipulative market practices. One nuance here is that no strong enforcement practices have been described in these rules against those who would choose to coerce, mislead, fraudulently influence via bribes. Deterrence mechanisms need to be set-up including ex-ante enforcement expectations such as failure to follow these practices shall remove securities licenses for life and jail time of a minimum of 10 years. Fraud has been rampant in all markets recently and strong enforcement rules will deter those who may choose to act fraudulently, but these consequences must be stated ex-ante as a deterrance mechanism within the rule itself. The proposed Rule 9j-1's safe harbor is overly broad and protective of a set of actions which are inherently fraudulent. By hedging activities to avoid inventory risk for a single participant, manipulation can be introduced into the markets by falsely creating the impact of a sale / purchase of shares on prices without the actual exchange of those shares via an exchange between two true market participants having opposing views. This has many negative externalities such as inaccurate pricing of securities and can lead to major risk in the system including at central clearing houses / parties in the case of corporate / shareholder actions. As such any safe harbors will increase systemic risk as opposed to relieving it and as such, no such safe harbor should be provided. While this may appear to concentrate risky decisions default consequences into the participants that made them, this is the responsible action to avoid systemic risk accumulating (with socialized losses on the horizon ) which is much harder to unwind. The proposed Rule 10B-1 and Schedule 10B will provide further transparency and allowing small investors to make informed decisions. While the thresholds seem to be set from a dollar basis or % shareholder ownership, it's important to make sure there are not underhanded and fraudulent agreements between participants to divide the dollar or % quantities amongst a basket of entities or even a basket of potential hedging products within a single entity that impacts a single underlyer. Therefore the rule should be even broader and require aggregation of small entities if they are related to each other or controlled by a single larger entity or collectively joined via coercion or in any way fraudulently manipulated to utilize such swaps individually but should be measured required to report in aggregate. Overall, these proposed rules will help to reduce costs for all investors by removing fraud and manipulation from the security-based swap market and hopefully as a result to the equity market. As a small investor, I strongly support these efforts and urge the SEC to move forward with their implementation with the additional ex-ante enforcement descriptions, removal of safe harbor, and aggregated transparency. Sincerely, Michael