Subject: Changes to Rule 504 of Regulation D of the Securities Act of
Date:    7/20/98 5:53 AM
     
     
Securities and Exchange Commission:
     
This email comment is being written in response to your May 21, 1998 
announcement of a proposed rule change to Rule 504 of Regulation D (e.g. 
Rel No. 33-7541 and File No. S7-14-98).  My comments are as follows:
     
My name is Ted D. Campbell II and I reside in Las Vegas, Nevada.  I am 
an ex state securities examiner from the State of Nevada (1995-96) and a 
ex legal intern for the Oklahoma Department of Securities (1990-1994). 
I am currently the President and CEO of Campbell Mello Associates, Inc. 
("CMA").  
     
CMA mission is to provide quality securities offering support for the 
developmental stage to mid size revenue companies.  These type of 
companies cannot afford the high cost of a legal firm and are generally 
unsure of the process of raising capital for expansion. CMA specializes 
in preparing the requisite document and filing support for federal 
exempt, state registered public offerings that are conducted by the 
company itself (e.g. "Direct Public Offering").
     
I provide you the information above in hopes that the Commissioners will 
understand that my comments come from experience.  I beleive the 
proposal to restrict the securities under Rule 504 for one (1) year 
pursuant to Rule 144 would be a major mistake.  The changes that are 
being proposed will significantly hamper the ability for small companies 
to raise the capital they need to expand their operations.  One of the 
best reasons that Rule 504 offerings have been successful to date is the 
free trading status of the securities issued pursuant to the exemption. 
By taking away this feature, the companies will either have to give up 
more of their enterprise (e.g. lack of liquidity garners a lower price) 
which is usually untenable for most small business owners. 
Additionally, most investors wil not invest in a restricted security 
offering due to the increased risk of the holding period.
     
I participated in the town hall meeting held in Las Vegas, Nevada that 
was held shortly after the proposed rule change was announced.  At this 
meeting, Commissioner Norm Johnson witnessed the consternation of many 
small business owners and advocates who thoroughly denounced the 
change.Speaker after speaker denounced these changes for over an hour. 
Commissioner Johnson expressed his understanding of everyones concern. 
The only person who spoke in favor of the proposal was an SEC 
enforcement attorney who rambled on about a fraud case he was trying the 
next week which involved 504 fraud.  It was quickly pointed out to him 
that fraud was present before Rule 504 and would be committed with or 
without the Rule 504 changes.
     
I would like to provide a case example of the effects of the Rule 504 
change and then propose a way to combat fraud and still keep the intent 
of Rule 504 intact.
     
EXAMPLE:  One of my clients is the State of Nevada's only full scale 
winery located in Pahrump, Nevada (e.g. Pahrump Valley Vineyards).  The 
Company has been grossing approximately 1 to 1.5 million in sales for 
the past seven years.  The Company signed a contract with CMA to take 
them public via Rule 504 in conjunction with SCOR under the Western 
Regioanl Review.  In our current valuation analysis, we are anticipating 
having to provide up to 5-10% more of the Company in the Direct Public 
Offering due to the lack of liquidity.  Additionally, the change will 
delay an operating, revenue producing company from providing liquidity 
for its shareholders for one year. The Winery's plans are to conduct the 
offering to expand production capacity and build several vacation 
cabanas. The changes to Rule 504 would have a detrimental impact upon 
the Winery and its shareholders.  This is a company trying to create 
wealth for investors, jobs in a small community, and growth for the 
future.
     
SUGGESTIONS FOR ALTERNATIVE CHANGES
     
(1)  As per the intent of the original changes to Rule 504, make the 
issuer register by qualfication in every state where shares are offered 
from or into (e.g. full state review) or the shares are restricted for 
one year under rule 144;
     
(2)  Require the NASD upon the initial Form 211 review to inquire 
whether the issuer has complied with State Blue Sky Laws.  This is not 
currently being done.  This would be made easy by the request for Blue 
Sky Permits from the states where investors have been sold pursuant to 
Rule 504 within the last year;
     
(3)  Restrict the shareholders securities in each state in which the 
state has allowed an exemption for 504 offerings (e.g. Colorado, New 
York, etc.) unless the offering has been through full registration; and
     
(4)  Please note by requiring state regidtration, the issuer would be 
locked into a static share price which would ward off some of the market 
manipulation and fraud committed by issuer's and thier rogue promoters.
     
     
These changes I have outlined as an alternative would be onerous enough 
to abate the fraud the SEC was attempting to combat, while at the same 
time providing legitimate issuers a means to utlize the exemption for 
what it was designed for - "SEED CAPITAL" for small business expansion.
     
Ted D. Campbell II
President and CEO
Campbell Mello Associates, Inc.
(702)-257-4770