From: bruce m. barrett [bruce_barrett@fastmail.fm] Sent: Saturday, May 03, 2003 12:35 PM To: rule-comments@sec.gov Subject: s7-24-99 Mr.Bill Donaldson I have the deepest respect for you. As a fellow Soldier / Marine now located on Fort Buchanan, Puerto Rico, i want to see the same protections given to me, as a share holder of Bulletin Board Stocks and Pink Sheet Stocks, taht is given to those on the major exchanges. Naked Shorting by Market Makers and off shore brokers, is rampant and with no controls and it is destroying the small company and small investor in those companies. I will add a post i found on a stock board for your inspection. it says it all and you need to know that the 'big boys' dont want to extend the same protecion to the bb and pinks, as it is the wild west with few rules and even fewer enforced. Please make the SEC under your guidance take away the abuse. Thank you. Bruce M> Barrett 787-707-3069 est m-f days here is the stock board post that i talk about that says it all: By: AlanC 03 May 2003, 11:41 AM EDT Msg. 952042 of 952084 (This msg. is a reply to 952027 by Silverbuletgirl.) Jump to msg. # SBG, Rodders and any other PCBMer considering attending the SEC roundtable: Ask the SEC why when thousands of complaints were filed by individual investors about naked shorting the SEC chose to listen to and represent the MM's best interest rather than the investors? Go PCBM!!! I want multiple dividends! Investors Tell SEC Of Market Maker Abuse... By Jack Burney Published by OTCNN.com 06/20/2000 08:35 AM CST (This is part of a series of articles about secret market maker manipulation (MMM) of OTCBB stock prices, and the need for a rule to require full disclosure of short positions in OTCBB stocks. To read the other articles, use MMM as a key word with the Word Search on the right margin of the Site. If you know of such instances of MM manipulation of stocks, please tell us the story at jburney@otcnn.com.) OTCBB investors, company CEOs, brokers, and Market Maker attorneys are sounding off about the SEC’s Concept Release 34-42037, File #S7-24-99, containing proposed changes in eight areas to the rules governing short sales and Market Maker Manipulation. (Read Article.) It’s standard practice for the SEC to ask for public comments on proposed rule changes, but the agency never expected the flood of complaints it has received about market maker abuse. The surprising outpouring has put pressure on SEC officials to “do something.” As one comment contended: “The governments of all countries take strong action when someone makes counterfeit money… Investors need help preventing or restricting the sale of counterfeit stock.” While the stated comment period is over, SEC is still accepting comments. The address and instructions follow at the end of this story. Here’s a sampling of what the SEC is hearing: “The naked shorting of OTCBB stocks should be eliminated,” said Martin Saucier, Senior Consultant, Project Manager for CGI Information Systems & Management Consultants, Inc. “One of the main reasons why "penny" stocks are so risky and volatile is not solely because of the companies themselves, but because of the rampant naked shorting by market makers and offshore brokers. This activity goes unchecked everyday and must be dealt with accordingly. I've personally have been burnt by these folks...let's make it fair for the ordinary investor!” Saucier went on to say “The abolition of naked shorting in conjunction with the requirements of being fully reporting will ensure a fair and equitable market for investors and companies alike, a market where a company's true value is reflected in the price and not distorted, suppressed or inflated artificially by manipulation.” Investor Sigmund Lee told the SEC: “The problem with current rules is market makers short the #### out of a stock and can’t get out, so what they do is play god by forcing prices to drop. They know that if they keep the prices low, investors will have no choice but sell after months of waiting and the stocks continued to fall despite very good news from the company the investors bought shares. The correct rule of SEC is to let the market determine the value of the shares. Naked Shorting should never be allowed!” The SEC heard from the Market Makers as well, or more often their attorneys. Roger D. Blanc, of the New York law firm of Willkie Farr & Gallagher, represented a slew of Market makers, including Bear, Stearns & Co. Inc.; Credit Suisse First Boston Corporation; Deutsche Bank Securities, Inc.; J.P. Morgan Securities Inc.; PaineWebber Incorporated; Prudential Securities Incorporated; and Warburg Dillon Read LLC. His clients, Blanc said, “regard short selling as an important market activity that often is helpful in providing liquidity to the market, particularly to facilitate customer transactions, and in offsetting market exposure in other related securities and instruments. Short selling can be beneficial to the market since it can help the market reach an appropriate new equilibrium after a change in overall market conditions or in the mix of information regarding particular issuers. Regarding the proposed expansion of Rule 10a-1 to cover Nasdaq stocks, Blanc said “The NASD's quotation-based short sale rule, under current market circumstances, seems reasonably well attuned to the unique market conditions affecting the Nasdaq market. As a result, it is not necessary to import the trade-based concepts of Rule 10a-1 to the Nasdaq market. If the Nasdaq market later takes on more auction-based characteristics than it has today, however, it may be appropriate to reconsider this conclusion at that time.” Translation: Market Makers don’t want rules that govern their activities in exchange-traded stock to be extended to OTCBB stocks. The statement goes on in lawyer-like verbosity. Investor Don E. Sprague wrote the SEC with this incisive comment: “Investors have a problem and we need your help. I think all investors agree that the price of stocks should always be determined by the real supply and demand on the free open market. There should not be any artificial method of creating excess or deficit supply or demand. The demand should be a result of investors examining the relevant information about the company then determining how much they will pay for stock.” “The governments of all countries take strong action when someone makes counterfeit money. The reasons are obvious, Sprague wrote. “Investors need help preventing or restricting the sale of counterfeit stock. The number of shares of a company can be artificially doubled for short selling. This is only good for the brokerage house and gamblers. “The brokerage house effectively creates counterfeit shares for every share it holds,” Sprague wrote. “Then the shares can be loaned to someone who wants to sell the stock but does not own any of it. This enables the brokerage house to collect commissions on the sale of the counterfeit stock. It also enables the gamblers to deflate the value of a company and take profit from an investor who legitimately wants to sell their stock. “The claim, that short selling is a valuable tool to keep the prices of stocks in line with the fair value, is absurd. The average investor has no way of knowing when the price of stock has been impacted by short selling or a short squeeze. A good time to buy a stock is at an artificial low just before a short squeeze. A good time to sell is after a short squeeze when the price is artificially high. The advisors who tell people when to sell short and to cover shorts have it best. They get to buy on the lows and sell on the highs,” Sprague concluded. Want to add your own comments? SEC says: The public is encouraged to submit comments on the following proposed rules during the comment period. Comments may be submitted in writing… or they may be submitted via electronic mail (e-mail). Send electronic mail-format letters of comment to the mailbox: rule-comments@sec.gov. This e-mail address has been created to provide the public with the opportunity to comment on proposed Commission rules. It is not designed to be a general question and answer service. All comments received will be made available to the public. Instructions: (1) On the subject line, please indicate the file number of the rule on which you are commenting (in this case “S7-24-99). (Include your name and professional affiliation (if any) somewhere in the body of the message. (3) Indicate which Word Processor format was used at the start of the message body.