Date:    12/22/1999  11:17 AM

Subject: support of bill

  To whom it may concern:
     
     
  From Gretchen Morgenson's August 27, 1999 NY Times piece titled 
  "SEC Probes Short-Selling Abuses by Day Traders": "The business of 
  selling stocks short is more highly regulated than the outright
  buying.because in the years surrounding the 1929 market crash, groups of 
  short sellers were found to have harmed investors by forcing down the 
  prices of certain stocks by the sheer force of excessive and unrelenting 
  selling." If the SEC thinks it's not still happening today, on a scale 
  far greater and more pernicious than ever, it is vastly, egregiously 
mistaken.
  The recent "Concept Proposal" which appears to seriously
  contemplate the weakening or elimination of shorting restrictions is 
  totally devoid of any reference whatsoever to the Internet, a powerful 
  new weapon in the short-seller arsenal of misinformation, deceit and 
  defamation. Completely ignoring the rocketing rise in Internet usage and 
  the commensurate vulnerability of increasing millions of individual 
  investors worldwide, the Proposal blithely proclaims: "national 
  securities exchanges today have high levels of transparency and 
  regulatory surveillance"-- as if all were hunky-dory and the playing 
  field eminently fair and level, when in fact, it is quite the contrary. 
  The so-called "uptick rule" currently protects investors in
  NYSE, AMEX and NASDAQ National Market System (NMS) stocks, but not 
  millions invested in OTC BB stocks or in the 1000+ NASDAQ Small Caps, 
  leaving them totally out in the cold, the poor stepchildren of NASDAQ 
  (except when it comes to collecting spreads and commissions and 
  including Small Cap daily volume in NASDAQ statistics for marketing 
purposes).
  When the SEC floated a similar proposal in 1976, both the NYSE
  and Amex strongly opposed any suspension of safeguards, the common 
  sentiment being that the short sale rule provided important protection 
  for investors that should not be removed. The NYSE believed the most 
  damaging consequences of any changes would be:"(1) wider day-to-day 
  price fluctuations; (2) disadvantages for public customers who could not 
  withdraw limit orders to purchase before market professionals sold 
  short; and (3) accelerated price declines and increased volatility"-- 
  all, evils that investors in NASDAQ Small Caps and BB's are painfully 
  accustomed to suffering in spades.
  A 1991 Report from the House Committee on Government Operations 
  observed: "a pattern of abusive and destructive rumor mongering targeted 
  specifically at companies" with major short positions, and that "the 
  uptick rule acts as a price stabilizing force and should be retained" 
  and extended to the Nasdaq system (which it finally was, in 1994, but 
  only for NMS stocks). What on earth makes the SEC think the situation
  is any less fraught with peril today when highly calculated, 
  Internet-fueled "rumor mongering" is more abusive, destructive, 
  far-reaching and profitable than ever?
  In 1996, even NASD itself concluded the rule was effective in 
  restricting short sale activity during large price declines and had no 
  adverse effects on market quality stating: "the Nasdaq Short Sale Rule 
  meets its intended objective - to slow down the piling-on of short sales 
  when prices fall - with very little adverse impact on normal short sale 
  activity on Nasdaq." Does the SEC think downward price manipulation
  and piling-on have suddenly gone out of style?
  And just a few short months ago, the July 1999 Final Report of 
  your very own Government-Business Forum on Small Business Capital
  Formation recommended: "To discourage `bear raids,' the Commission should 
  establish rules prohibiting short selling in the over-the-counter market 
  after a security has crossed a certain downward trigger.and that "the same 
  "uptick" rules should apply to all stocks (including NASDAQ Small Cap and 
  OTC BB). Interestingly enough, it also urged that "Broker-dealers (who 
  regularly, cavalierly flaunt and abuse what few rules there are with 
  relative impunity) be strictly required to meet the same coverage 
  requirements for naked shorts as applied to customers; and that a system 
  be implemented and vigorously enforced to require timely, accurate 
  reporting of short positions. Was your own blue ribbon Forum just blowing 
  smoke?
  Yet notwithstanding this ongoing wealth of evidence of the need
  and desirability for maintaining and enlarging investor protections, you 
  somehow, amazingly, offer the rather perverse view that "Developments in 
  the markets.may have diminished the need for the Rule in its current 
  form." Huh? On what planet are you guys smoking that stuff?
  SEC Enforcement Director Richard Walker's recent reference to
  the Internet spawning "A Bull Market in Securities Fraud" must recognize 
  and address the fact that along with promoters who pump and dumpcome an 
  equally vicious and ever more clever and diabolical group who short and 
  distort; and that Rules protecting investors from these venal, ethically 
  bereft predators must be expanded not curtailed, if market integrity is 
  to be anything more than a flimsy pretense.
     
     
with regards,
     
Linda Wei