File No. S7-25-02From: Lane Bucklan [lsb@rochdale.com] Sent: Monday, July 29, 2002 2:23 PM To: 'rule-comments@sec.gov' Subject: File No. S7-25-02 File No. S7-25-02 July 29, 2002 Jonathan G. Katz, Secretary United States Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Dear Mr. Katz: Rochdale Securities Corporation appreciates the opportunity to comment on the Commission's proposal with regard to the proposed rules concerning the identification and verification of brokerage customers. We are fully supportive of the Commission's and Treasury's efforts to prevent money-laundering activity. We offer the following comments and suggestions on the proposal. Rochdale Securities Corporation is a broker/dealer registered with the National Association of Securities Dealers in addition to being a Member of the New York Stock Exchange. We characterize ourselves as an institutional broker/dealer transacting business primarily with both registered and unregistered investment management firms who manage client accounts on a fully discretionary basis. But for a handful of employee related accounts, we do not transact retail business. Our reading of the proposed rule gives us the strong impression that it was written with solely the "retail" broker/dealer in mind without taking into consideration the realities of how an "institutional" broker/dealer opens and transacts in accounts. Institutional brokerage firms such as Rochdale transact business primarily with investment management firms who are granted trading authorization to trade in their client accounts. These investment management firms will establish a relationship with an institutional brokerage firm and may in turn open hundreds of accounts for their advised clients with the broker. Large quantities of accounts may be opened on any given day. These accounts are not treated as retail accounts on the broker's books but rather as institutional C.O.D. accounts where all securities and cash are delivered out to either a bank custodian or prime broker. Very often the account title and settlement instructions are transmitted electronically to the broker from the investment management firm via systems such as Omgeo's Alert. The institutional broker/dealer under these circumstances does not have contact with the end clients whose accounts are being managed by the investment management firm even though each has an account with the broker. The proposed rule defines "customer" as any person who opens a new account or is granted trading authorization with respect to an account. The proposed rule further requires that under either one of these situations the broker is required to obtain certain identifying information and then use such information to verify identity. While the proposed rule does allow flexibility in the implementation of a customer identification program, taking into consideration such factors as the nature of a broker's business, we nevertheless view the proposed rule as requiring an institutional broker/dealer, taking direction from an investment management firm, to obtain and verify identifying information from both the end client as well as the investment management firm "granted authority to effect transactions" in the account. We believe that imposing such a requirement on an institutional account is not practicable, would be overly burdensome and does not take into account the business realities present in the institutional brokerage community. An institutional broker/dealer taking direction from an investment management firm does not have contact with the end client. Neither the investment management firm nor the client wants such contact to occur. The institutional broker's sole purpose is to execute trades placed by the investment management firm which then instructs the broker as to how those trades are to be allocated among the advised client's accounts. The information obtained by the institutional broker/dealer with regard to the end client is, for the most part, limited to an account name, taxpayer identification number and trade settlement information. An address may or may not be present and is often the address of the custodian bank or prime broker, not the client. These accounts are often those of institutions but may be individuals as well. Any other relevant information resides with the investment management firm, custodian bank or prime broker. If it was the Commission's and Treasury's intention to differentiate between "retail" and "institutional" accounts, we do not believe that this is evident from the proposed rule. If the Commission and Treasury under the facts described above would not view the end client as the person who "opens" a new account because it is in fact the investment management firm which is doing so, then we believe that further clarification is necessary. Otherwise, an institutional broker/dealer will be required to obtain and verify identifying information for each account opened on behalf of a client by an investment management firm. This would be a tremendous burden which based on the realities of the institutional business process could not be achieved. These are not retail accounts where one broker opens an account for one client. Here, a trader has a relationship with an investment management firm which, on any given day, could open a hundred accounts for its advised clients. The advised clients are not even aware that the account has been opened on their behalf. If it was the intention of the Commission and Treasury to treat both institutional and retail accounts alike, then we believe that the proposed rule must be re-evaluated to take into consideration the functional differences between the two. NASD rules recognize that "know your customer" requirements are substantially different for institutional accounts and we believe that the proposed customer identification rules must do the same. If you have any questions regarding this letter, please contact me. Thank you for providing us this opportunity to comment on the proposal. Sincerely, Lane Bucklan V.P.-Legal and Compliance Rochdale Securities Corporation 570 Lexington Avenue New York, NY 10022 212-588-3430 212-588-3414 (fax) _________________________________ This email communication is confidential and is intended only for the individual(s) or entity named above and others who have been specifically authorized to receive it. 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