From: RGM Communications Inc. [rgodwin@rgm.com] Sent: Friday, January 02, 2004 3:53 PM To: rule-comments@sec.gov Subject: File No. S7-23-03 January 2, 2004 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Subject: File No. S7-23-03. "The Security Exchange Commission (SEC) administers and enforces the U.S. federal securities laws in order to protect investors and to maintain fair, honest, and efficient markets." The above quote was taken from your web site http://www.sec.gov/ A song lyric from the 1970's stated, "Two out of three ain't bad". But with reference to regulatory enforcement by the SEC, it's one out of three and it sure is bad. The trading of microcap companies is not fair and not honest. But, truth be told, it's very efficient at allowing money to be stolen from the pockets of the investors. The consumer, the investor, is the victim of a commercial fraud and if this were any other business, the brokerage house officials and the brokers would be in jail for fraud. I paid my money but where's my goods/chattels/stock and why can't I get timely delivery or any delivery at all? How did the brokerage industry get this "special" status and why are they exempt from the fraud laws? In the interest of plain, full and complete disclosure, shouldn't every client opening a new brokerage account be given a prospectus letter detailing the fact that they in the future may be sold fraudulent shares? History is proving that the SEC has become a Trade Association catering to the interests of its members, the brokerage industry, rather than to the interests of investors. As shown by the public record, the large brokerage houses penalized for wrongdoing pay a small fine without having to admit or deny the charges (the proverbial "parking ticket"), and proceed with business as usual. The SEC has now joined the Depository Trust and Clearing Corporation (DTCC) and the North American Stock Dealers (NASD) association to become the enemy of many public companies. Not because the public companies are crooked or looking to do anything dishonest, but because the SEC by their inaction regarding trading abuses, specifically naked short selling, have helped shave the dice to insure that honest speculation based solely on business risk is not possible. The companies and their shareholders not only have to fight their business environment but a dishonest public share market condoned by the SEC and run by the brokerage houses and their market makers. The SEC is a co-conspirator to consumer fraud and should be investigated by an independent United States Congress or Senate commission. To aid this purpose, we have started an on-line petition to allow the public a venue at http://www.investigatethesec.com/ to register their displeasure with the SEC and to aid the institution of an investigation into the SEC misconduct. Its evident that the 1,000 or so lawyers working for the SEC, and writing the regulations regarding the market and short selling, have no brokerage experience and have never worked as a desk trader making market and running a pro trading account. The SEC therefore, with no experience at the job that they're trying to regulate, is like a man telling a woman how she should feel during childbirth. Having spent many years as a broker for a full service brokerage house, and now as a director of a microcap company, I've witnessed first hand the hypocrisy of industry management covering up an employee firing offence for the expediency of profit. How can the public expect the SEC to oversee the honesty of the marketplace when not only does the SEC not know how the brokers play the game, they don't even know what the game is? To an outsider it's obvious that the SEC hasn't the interests of the public investor at heart. Daily they allow their friends at DTCC, NASD and the brokerage houses to tell them lies about what's really going on inside the industry. And as recently seen, the SEC only gets active when outside pressure by politicians and people like Eliot Spitzer gets too great and pushes them into action. For a small public company, trying to work with the SEC to solve the current problems is like dealing with the hypocrisy of the pious or the arrogance of an Emperor without clothes. How many SEC employees don't do their job because: 6. They've forgotten the mandate by which the SEC was created and under which they were hired; 5. They have become too buddy-buddy with the people they're supposed to regulate; 4. They, or their bosses, are cowards and don't have the courage to do their job; 3. They're incompetent, should be fired, but for various reasons can't be kicked out; 2. They want to quit the SEC and go to work for the brokerage industry and don't want to bite the hand that's going to feed them in the future; 1. They are being paid off and are corrupt. The SEC SHO rule changes are a band-aid for a gangrenous limb. They don't go far enough for the future and certainly don't address the problem of non-delivery of the naked short sale trades prior to 2004. What about all the previous "fail to deliver" trades? Are they going to be settled and if so, when? Will there ever be a mechanism developed allowing a corporation to reconcile the true number of their shares issued with the number supposedly "owned" by investors? Again, these proposed rules show a lack of courage by the SEC in their Trade Association coddling of the brokerage houses. They're half measures, rule based and fall far short of instituting any meaningful change to the ethics by which the trading should be done. What happens to the client, the end purchaser, after all these changes? Is he better served? Will these rules stop the naked short selling abuse? Will his brokerage house "buy in" the client's non-delivered purchases? I don't think anything will change with these rules. Having a brokerage license is a privilege, not a right. If the SEC has a brokerage house that doesn't want to follow the proper short selling rules, why doesn't the SEC, for example, restrict the brokerage house license for a day and only allow them to sell or short cover equity shares? Make the punishment hurt and fit the crime. If they abuse the rules again, restrict their trading for a week. And if they fail to learn their lesson, pull their right to conduct business in the financial markets forever. Their clients will be much better served moving their accounts over to a honest brokerage house. For specific responses to your SHO rule changes, I refer you to and support the comments of the November 21, 2003, SHO submission by H. Glenn Bagwell, Jr., Attorney at Law, reproduced below. Sincerely, Russell Godwin .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. : Webmaster's Note: Attachment may be found be found at : : http://www.sec.gov/rules/proposed/s72303/hgbagwell112103.txt : .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..