September 17, 2008
Unfortunately, I made the mistake of submitting my comments for S7-19-07 on the S7-21-08 comments page. I apologize for my error. Allow me to begin by stating that I have no problem with legitimate short selling. Here is what I have to say about the practice commonly referred to as "naked short selling". In my opinion, naked short selling is inherently unfair and illogical. Common sense dictates that one can not sell something until they actually take possession of it. I believe that there should be no exceptions or exemptions for any type of investor who wishes to engage in short selling. All short sellers should be required to pre-borrow all the shares before they can sell them. Under the current system, non-borrowed, "phantom" shares can be sold short and the individuals really are not concerned if the shares are ever delivered. That is why, it is imperative that the SEC outlaw naked short selling and enforce stiff penalties on all offenders. In my opinion, it is the average American investor, who maybe has a 401K with some mutual funds and an IRA, who is harmed most by naked short selling. And who are the main beneficiaries of naked short selling? Hedge Funds and investment banks. Now whose interests are the SEC supposed to protect?
Investor confidence was terribly shaken by the Enron/Worldcom era. Steps were taken (Sarbanes-Oxley) that brought investors back into the market. I urge the SEC to level the playing field and restore investor confidence by outlawing and enforcing rules which ban the practice of naked short selling.