6 May 1999

220 Circle Drive

Plandome Manor, New York 11030

Jonathan G. Katz

Secretary

Securities and Exchange Commission

450 Fifth Street, NW

Washington, DC 20549

Re: File No. S7-5-99

Dear Sirs:

As an investor in and a market maker of the so called "microcap stocks" for over twenty years, I feel compelled to make some comments on the proposed changes to

Rule 15c2-11.

A change this sweeping should not be instituted without a clearer view of the potential

consequences. Will these changes lead to less liquid and less transparent markets? Can the Commission be sure that there will be any markets for the great number of legitimate microcap issues? What chilling effects will this rule have on capital formation—will investors shun this area because of the uncertainty of a viable secondary market?

The proposed rule is based on some questionable assumptions. First, that the microcap market is fraught with fraud. Second, that legitimate market makers "validate" a stock and abet the fraud by making a market in the fraudulent security. Third, that this rule is the best way to reduce fraud—the elimination of fraud is worthy goal but not possible without the elimination of human greed.

The overwhelming majority of microcap securities involves no fraud. The Commission gives no indication what percentage of microcap stocks they believe are fraudulent. Without a firm idea as to the extent of the problem should it propose a rule as groundbreaking as the proposed 15c2-11?

Burdening the market makers with a review function, which involves substantial costs and the possibility of after-the-fact litigation for the purposes of eliminating fraud, risks the elimination of priced quotes to the detriment of all market participants. The trading in these issues will have to go somewhere. A "somewhere" that will not be as open and visible as the present structure of NASDAQ Bulletin Board and NQB Pink Sheets. Legitimate market makers with fully visible quotations are a better check on fraud than having unpriced markets.

The solution to the "microcap" fraud problem lies with policing the point of sale—where the retail broker contacts the customer—not changing the structure of the market itself. Education of the investing public is paramount. They have to learn that not everyone who recommends an investment is honest. Today’s Wall Street Journal contained an NASD educational piece on the dangers of day trading—an excellent beginning. Rogue brokers and broker dealers have no place in the securities business. But legitimate market making firms perform a necessary and valuable service to the investing public and to the capital markets as a whole—let’s not throw the wheat out with the chaff.

Sincerely yours,

John D. Browning