Date:    12/8/98 4:46 PM
     
     
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission 
450 5th Street, NW
Washington, D.C. 20549
     
RE:  Books and Records Requirements for Brokers and Dealers                  
        Under the Securities Exchange Act of 1934 
        Release No. 34-40518
        File No. S7-26-98
     
Dear Mr. Katz:
     
The Vermont Securities Division, with one reservation, strongly 
supports the Securities and Exchange Commission's reproposed rule.  
We believe that the reproposed amendments will enhance the 
efficiency of the regulatory process and facilitate investor protection.
     
We wish to specifically comment on one aspect of the reproposed rule.
     
DEFINITION OF LOCAL OFFICE
     
The Commission has requested comment on whether the definition of 
"local office" under reproposed rule 17a-3(g)(1), which as presently proposed would include locations where two or more associated persons conduct securities business, should require a higher number of associated persons.
     
We maintain that investor protection would be better served by structuring the definition to include those locations where one associated person conducts business.  In the last eighteen months, 
three significant cases involving either fraud or abusive sales practices have been uncovered in one-person offices in 
Vermont.  Two of these cases, which together involved the misappropriation of several hundred thousand dollars, have 
spawned criminal proceedings.
     
There are presently 415 registered branch offices in Vermont.  
Vermont law effectively requires the registration of any securities business location where either records are maintained or business 
is conducted on a regular basis.  The vast majority of these 
registered offices are one-person offices as one would suspect 
to be the case in a rural state.  While we do not expect that 
one-person offices should maintain the same books and records 
that are kept on the premisesof an office of supervisory 
jurisdiction or the like, we do believe it is imperative for the protection of investors that there be immediate access to 
those records that relate to the detection of abusive sales practices.
     
Frankly, we are baffled that any responsible broker-dealer would 
prefer not to maintain certain core books and records on the premises 
of one-person offices. One wonders how an associated person could effectively monitor customer suitability on an ongoing basis 
without easy access to the appropriate records. In any case, we 
have historically observed that one-person offices rarely enjoy the 
same kind of compliance support and supervisory oversight that 
one encounters with larger offices.  More often than not, these 
offices are supervised by persons in other states who are also
responsible for overseeing literally scores of such offices.  Our routine examinations of one-person offices typically disclose 
selling away problems, suitability issues and unauthorized 
trading.
     
In closing, we note that our agency has the statutory authority to assess broker-dealers for the expenses incurred in undertaking 
an examination, including time and mileage.  Any on-site 
examination which necessitates follow up to obtain documents 
that are not kept on the premises only serves to increase
the costs that may be charged to the broker-dealer. 
     
Thank you for the opportunity to comment on the reproposed rules n books and records.
     
Sincerely,
     
Richard S. Cortese
Deputy Commissioner