May 4, 2009
May 4, 2009
Dear Chairman Schapiro:
After 30 years of institutional equity trading, I left Wall Street six years ago to form Equity Insight, which is dedicated to working with companies to help reduce price volatility and address aggressive short selling or stock manipulation.
In that time, we have seen the devastating effect short selling can have on a companys stock price, especially when done in a concentrated and collusive manner as was recently the case with Lehman Brothers, Morgan Stanley, Bank America and Ford, to name a few.
Drawing on this experience, I write today to strongly urge SEC approval of the proposed Uptick Rule. Of the five short-sales proposals being considered, the Uptick Rule offers the best hope to promote market stability and restore individual investor confidence.
As you know, the proposed Uptick Rule, in effect, would reinstate SEC Rule 10a-1, which was eliminated July 7, 2007, after having been in effect since 1938. While not perfect, it did discourage and at least slow down predatory short selling and Bear Raids organized for the sole purpose of destroying a companys stock price. In our opinion, the sooner this rule is reinstated the better, as its questionable elimination has contributed to severe damage and increased volatility in Americas capital markets.
Of the two Uptick Rules being considered, we favor the proposed Uptick Rule over the proposed modified Uptick Rule. We do not like the proposed modified rule based upon the national best bid because we believe that professional short sellers would have little problem finding ways to manipulate the bid for their own purposes.
The three proposals using circuit breakers are substantially inferior, in comparison to the Uptick Rules. These rules would provide temporary relief only after stocks had been victimized. Problem is, suspending short selling when a stock is down by X wont solve the problem of manipulative and collusive short selling, since predatory short selling is not a one-day event, but the culmination of a series of events. To think one can resolve this complex problem simply by implementing a circuit breaker is nave.
In conclusion, there is no question that illegal predatory short selling exists in the current regulatory environment and that it has hindered investor confidence in the integrity of the markets. By adopting the proposed Uptick Rule, the SEC will be ruling in the best interest of investors and, of equal importance, the companies in which they invest.
Sincerely,
William K. Barnard
Chief Executive Officer
5956 Sherry Lane, Suite 506
Dallas, TX 75225
web site:www.equityinsightinc.com
email: wkb@equityinsightinc.com
(214) 368-9990