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Subject: SEC File No. S7-23-03

November 6, 2003

Chairman Donaldson and SEC Commissioners:

Re: File No. S7-23-03

To initiate this letter, I would like to thank each of you for finally
taking a step in the proper direction with regards to "Illegal Shorting".
I am dismayed that it has taken so long based on the losses incurred while
you have "Investigated" a well-known abuse but must commend you on trying
to move forward with progress.  Now, however, lets discuss the proposal
presented.

In the late 1990's, the SEC sought the advice and comments of Investors and
Institutions regarding shorting abuses.  This comment period yielded better
than 2000 comments addressing a common issue of illegal "Naked" shorting.
In response to this, the SEC took meager actions and is again, 4-5 years
later, seeking additional comments this time admitting those 2000+ letters
were correct and illegal "Naked shorting" exists.   The SEC went so far as
to call it Manipulative, Abusive, and Problematic.  The SEC fails, however,
to address how and why it is manipulative, abusive, and problematic and as
such fails to drive to the root of the issue.  The SEC has failed in using
5+ years of data to seek out the root and to cut it off.

For any abuse in trades to occur it starts with the basic principles of a
trade.  Settlement!  A share in a company is transferred between a buyer
and a seller based on a basic principle of a cash transfer for delivery of
a certified share (Electronically or Physical).  The Securities Industry
has elected the Depository Trust (DTCC) to undertake the task of
controlling trade settlement and the proper accounting of a trade.  If this
activity is being monitored for abusive activities like "Naked shorting" as
was proposed in September 2000 Organized Crime Session with the House
Finance Committee they would never be the abusive vehicle they are today.
The Trillions in Unsettled shares that exist would never have taken place
because there would be a control over trade settlement.  This is an area of
reform that the SEC fails to get to and an area that propagates the abuse.
Failed trade settlements cost issuers and investors billions each year and
only benefit the Broker-Dealers taking in Commissions and those buying and
selling shares they have no access to.  The SEC Regulation SHO has
protected the DTCC in their failures and fails to address the Trillions in
unsettled trades on the books today.

Regulation SHO is in some instances nothing more than a regurgitation of
the existing NASD and NYSE regulations with slightly different spins in
some areas.  Regulation SHO fails, however, to consider todays evidence and
to stop todays issues from manipulating tomorrows reforms.

Every Month the NASD reports Fines and Sanctions being placed on our
Brokerage Firms and Market Makers for failures in conforming to
regulations.  In most months, if not all, you will see fines imposed for
what is called "Failing to make Affirmative Determination prior to
executing a trade" or Improperly tagging a short sale by putting a long
sale modifier on the trade.  Both of these are actions that represent abuse
to a security. Failure to perform affirmative determination is implying
that the stock cannot be borrowed to settle.  Hence, dilution to that
security.  Dilution reportedly  having a negative impact on a security and
those holding it.  The improper tagging of a trade is a well known offense
on Wall Street and also allows these trades to skirt certain securities
rules.  Long sales do not require affirmative determination so a failed
settlement can take place on a long trade and not be caught.  Likewise,
Regulation SHO would not ensnare this trade into it's trap of failed
settlement because the trade was not a "Short Sale" on the books even
though it was in reality.   Relying on the NASD to catch and enforce this
is allowing a period of abuse to take place before getting caught.  The
real security in thwarting these potential means of side-stepping
regulation SHO is to properly create reforms that address FIRM settlement
requirements on all trades.

Present SEC Regulations use the phrase "Best Attempts" and "Reasonable
Time".  These are ultimately phrases that make excuses for failures and
allow abuses to become simply overstepped excuses that the SEC and SRO's
ignore.  These are the excuses being used today when "Best Attempts" to
trade settlements is afforded a term of 1 year because these firms cannot
find guaranteed shares AT PRESENT PRICE best on present day conditions.
Therefore, they wait out the shareholders until they sell into the "Best
Interests" of the abusive.  The SEC must define very rigid timelines for
Trade Settlement on all securities and then, if there are justifiable
reasons to miss these deadlines, the SEC must define those justified events
and define secondary timelines.  "Best Attempts" in an industry rampant
with greed and deceit is not in the best interests of the investor.  It is
in the best interest of those looking to take advantage for revenues.

The SEC Regulation SHO must also carry the weight of future deterrents to
abuse.  It is our Wall Street Institutions that we place our investments
with as it  is these Institutions (Broker Dealers) that we contract out to
properly execute our trades.  We cannot trade ourselves and have no means
of validating the behind the scenes actions of our brokers.  Therefore,
these firms must be tightly controlled to meet their contractual
obligations to us.  Regulation SHO lacks any type of deterrent to Broker
Dealers playing an active role in fraud.  Our Broker Dealers protect each
other through forgiveness.  This is strictly in the best interests of the
Industry and not the Investor.  No investor would forgive trade settlement
at the expense of diluting their own investment but one firm would forgive
settlement on a trade because they would see it reciprocated back.  This
needs to stop.  Regulation SHO must address sanctions and penalties to our
Wall Street Firms initiating with 2X commissions being forgiven for trade
settlement failures beyond a threshold and escalating it up for additional
periods of settlement failures.  Fines should originate at the failing firm
first but then be imposed on both the buying and selling firm for failure
to enforce each other.  If we want self regulation we must put stress into
failures and not forgiveness.  Monetary pain is that stress.  Those
monetary pains should be provided directly to the issuers whose trades had
the problems as that would be in the best interest of all investors.  Those
penalties could be returned to all investors by way of a dividend or higher
asset values.

In closing, I again want to express my delight and dismay at the SEC for
these proposals.  I am delighted that some measures are being taken but
more dismayed at the efforts it has taken to get here.  The lack of
compassion by the SEC at what their failures in doing so has taken upon
this Country is unacceptable.  The lack of compassion to all those who have
complained about this issue since the late 1990's is reprehensible based on
the reality that they were correct in their assessments.

In September of 2000, the SEC testified to the House Finance Sub-Committee
regarding Organized Crime on Wall Street
(http://www.sec.gov/news/testimony/ts142000.htm).  This report addressed
many abuses that were taking place in 2000 and it highlighted greatly that
the Penny and Micro-Cap companies were ripe for Organized Crime
infiltration.  Likewise, recent events in terrorism have linked stock
manipulations with the financing of terrorist activities.  The SEC and FBI
participated in an investigation of Pacific International between 1996 and
2000 where the manipulations addressed are linked to organized crime and
terrorism.  The abuses mentioned were illegal shorting of US penny stocks
through offshore accounts.  That is exactly where Regulation SHO is today.
In all, the data has been available for many years linking the participants
of illegal shorting with many of the activities that threaten our National
Security.  To think that the SEC and it's supervisory auditors (Senate
Banking and House Finance) have allowed this abuse to continue knowing
where some of the money is diverted makes you wonder about our Nation and
our Leaders.  To date, they (SEC, NASD, SRO's) have called the Penny Stock
and Micro-Cap Markets the 'Wild West" but that "Wild West" is taking US
dollars and sending them overseas to venues that are against our National
Security.

Wall Street needs to have clearly defined rules if we are to stop the
manipulation of our markets.  There is not enough integrity within the
Industry to let them decide on their own.  Recent events have proven that
out.  Regulation SHO falls short of clearly defined rules and allows to
many "Excuses" for the violators to get around these laws.  You now have
the opportunity to right the mistakes and oversights of 1999, don't make
that mistake again.

Thank-you all for your time and considerations.   Please do not let the US
and it's Markets down by failing to take swift and appropriate action.
Enforce all Trade Settlements and the abuses wil slow down tremendously.

David E. Patch Jr.
Topsfield, Ma.