Securities and Exchange Commission
San Francisco District Office

Dear Sir:

President Clinton tells me that the small company is the backbone of the U.S. economy. However, when someone like myself (a small investor), decides to invest in a small company, he soon discovers numerous, unexplainable events. (For my purposes I define a small company as one that has a market capitalization of between 25-200 million dollars and is listed on NASDAQ.)

For example, I will read a news story: "New York -DJ- So and So's shares were down 3.6% on heavy volume with sources saying rumors spreading through the market described the company's margins as being under pressure." Who are these sources and why are they not questioned about how they got this information? If corporations are to "make public all information about themselves that investors need in order to make intelligent investment decisions," and information that is not public and is obtained from insiders be illegal, why would someone (the sources) openly admit that they had this "inside information?" It seems to me that it is accepted to obtain inside information as long as you say, "It's a rumor." Is this true?

A number of times a stock will drop by 50% and then within a few days or weeks the company will report a negative news story. It is obvious that there were privileged stock holders who were told about this negative news before the company announced the news to the general public. No one is held responsible and the investors who were honest are given some lame excuse for the event.

Other times a stock will drop by 50% and the company will be asked about it. The company will answer by saying "No comment." Doesn't the company give up the right to its privacy when they sell stock to the general public? Isn't anybody concerned about why the company doesn't want to comment? By not commenting doesn't that open the door up for information to "leak" out illegally?

It would be very easy for someone who does not have a vested interest, to investigate and make sure that the company is not withholding information that should be made public. I have even heard that some companies make it their policy not to comment about movement in their stock prices. How is this possible when there is stock held by individuals who were told by the government that they would be informed about any information that may affect the company? Investors were not told that companies simply had to say it's not their policy to comment.

I have written over ten companies in the past two months. I asked questions such as what are your company's projected earnings for the next four quarters, net insider trading activity for the past six months, net employee count for the past six months, last year's published news stories and current short interest (I asked only for information that was available to other investors and information that many companies will share with analysts and institutional investors.) Only four companies replied, it seems that many companies don't even want to deal with answering questions from the small investor, but will be more than willing to tell larger investors who are trading their stocks.

Like I said at the beginning, President Clinton says that the small company is the backbone to the U.S. economy. If this is true then why can't a small investor like myself be given a fair deal when we decide to invest in those small companies? And if I'm simply not well informed where can I go to get better informed? (it has to be somewhere other than school because I have already spent six years in school working on an MBA and none of these issues were ever talked about)

Sincerely,

ADDENDUM (May 23, 1999)

Here's are some quotes from CNBC within a three week period. And these are only the ones I heard, since I only watch CNBC for a couple of hours a week, there is no telling how many times they use terms like: I have heard, but not confirmed, takeover rumors, and rumor used in the general sense. I guess the SEC only cares about certain individuals and companies who start and spread rumors, because from what I can see, no one, including the SEC, ever challenges CNBC on where they are hearing these rumors, rumors that could be inside information.

"I have heard, but not confirmed," in reference to someone shorting stocks (Fabor, 3:21 pm, 5-4-99).

"Takeover rumors" regarding 3Com (all day long, 5-14-99).

"Rumors floating around about Argentina's devaluation" (Kathleen Hays on Squark Box, 5-23-99).