Nationwide Financial Services, Inc.


Kevin S. Crossett
Vice President - Associate General Counsel

Office of General Counsel
One Nationwide Plaza, 1-35-10
Columbus, OH 43215
Telephone (614) 677-2406
Telecopier (614) 249-7254

July 18, 2003


Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. PCAOB-2003-02 - Proposal by the Public Company Accounting Oversight Board (the "Board") to Establish an Annual Accounting Support Fee

Dear Mr. Katz:

Nationwide Financial Services, Inc. (the "Company") appreciates the opportunity to submit its comments concerning the Board's proposal to establish an annual accounting support fee to fund the Board's operations, as required by Section 109 of the Sarbanes-Oxley Act of 2002 (the "Act").1 The proposal specifies the manner in which accounting support fees are to be allocated among issuers, including investment companies.

In accordance with the Board's proposal, the Company is included within the "Equity Issuers" class of issuers. In addition, certain Company affiliates, through the use of separate accounts organized as unit investment trusts (the "Separate Accounts"), issue variable annuity contracts and variable life insurance contracts (collectively, "Variable Contracts"). Such Separate Accounts would be included within the "Investment Company Issuers" class of issuers under the Board's proposal but for the fact that the unit values of such Accounts are not made publicly available. On the basis of the foregoing, the Company submits that such Separate Accounts should be deemed to fall within the fourth class of issuers, i.e., the "All Other Issuers" class of issuers. Accordingly, no portion of the annual account support fee should be allocated to such Accounts.

For the reasons articulated below, the Company strongly believes that the Separate Accounts should be deemed by the Board to fall within the All Other Issuers class even if, at some point in the future, the unit values of such Accounts are made publicly available on a monthly, or more frequent, basis.

The Board has indicated that, in establishing rules concerning the allocation of the accounting support fee, it was guided by two overarching principles that emanate from Section 109 of the Act: (1) such fee must be allocated in a manner that reflects the proportionate sizes of issuers and (2) within that framework, such fee must be allocated in an equitable manner.2 Because of the differences between management investment companies and insurance company separate accounts that are registered as investment companies, the Commission has seen fit on several occasions to craft rules that differ in their treatment of management investment companies and insurance company separate accounts, respectively.3

For purposes of ensuring that the accounting support fee is allocated in an equitable manner, the Board has acknowledged the importance of taking into account the risks that an issuer poses to investors and the complexity of the audit process relating to a particular class if issuers. As a result, the Board has deemed it appropriate to levy such fee on the Investment Company Issuers class at a reduced rate and to levy no portion of such fee on certain other issuers.

In its recent comment letter addressed to the Commission on this subject, the Investment Company Institute (the "ICI") noted that insurance company separate accounts typically invest their assets in one or more underlying open-end investment companies.4 The ICI pointed out in its letter that treatment of separate accounts as issuers subject to the annual accounting support fee would result in the assessment of such fee twice on the same set of assets. The ICI also discussed the financial statements that are issued by insurance company separate accounts and described such financial statements as statements that "represent nothing more than the account's investments in the underlying funds."

In light of (i) the manner in which insurance company separate accounts operate and (ii) the limited content of their financial statements, such separate accounts and their financial statements present minimal risks to investors. In addition, the audit process, with respect to such financial statements, is relatively simple and straightforward.

On the basis of the foregoing and, in the interest of allocating the annual accounting support fee among issuers in an equitable manner, the Company strongly urges the Commission and the Board to ensure that the final rules that are issued clearly identify insurance company separate accounts as issuers that fall within the "All Other Issuers" class of issuers.

We appreciate your consideration of our comments. If you have any questions, please contact the undersigned at (614) 677-2406.

Very truly yours,

Kevin S. Crossett

1 Securities Exchange Act Release No. 34-48075 (June 23, 2003), 68 FR 38406 (June 27, 2003)
2 PCAOB Release No. 2003-003 (April 18, 2003)
3 See, for example, (i) Securities Exchange Act Release 34-47262 (January 27, 2003) (pertaining to the certification of periodic reports pursuant to Section 302 of the Act) and (ii) Proposed Rule 38-1 under the Investment Company Act (Release No. IC-25925) (February 5, 2003) (pertaining to the establishment of investment company compliance programs).
4 See Comment Letter, dated July 16, 2003, addressed to Jonathan Katz on behalf of the Investment Company Institute by Gregory M. Smith.