November 24, 1998
Jonathan G. Katz, Secretary
Securities & Exchange Commission
450 5th Street N. W.
Mail Stop 6-9
Washington, DC 20549
Re: File No. S7-26-98
Dear Secretary Katz:
The following are comments concerning the proposed revised rules to the Books and Records Requirement for Brokers and Dealers under the Securities Exchange Act of 1934.
The proposed rule revision to 17a-3(a)(17)(ii) would require an introducing brokers clearing firm to provide the customer with the name, address and telephone number of an individual at the clearing firm to whom the customer may submit complaints. While notifying the customer to whom and where to submit complaints is a good rule, the information should be someone at the introducing firm. The customer knows the introducing firm since that is the institution that conducts his/her business. If an introducing brokers customer sends a complaint addressed to the clearing broker, who is the official owner of the complaint? Who files? Who maintains the official record? Who is responsible for the response? Based on these questions, it makes sense to provide the customer a contact at the introducing firm. Having complaints going to the clearing firm would also result in delays to respond and satisfy the customers complaint.
The revision to 17a-3(a)(6) & (7) would require that the name of the broker or other person who takes or enters a trade for a customer be noted on the memorandum of trade. Discount brokerage firms or discount broker divisons of a firm, which only take unsolicited orders, should be exempt from this provision.
The proposal to require blotters in local offices may cause an initial financial burden to firms which have many three or less broker offices. Some firms maintain blotters for these offices in a central location. The cost to develop a system or to buy equipment to comply with this rule could be significant. Some firms with many small offices, do not maintain records by office but by some other designation such as a region. Some of the blotters may not be able to be broken down by branch without significant programming cost.
Since firms are required to provide records to regulators promptly, such records as blotters, should be able to be maintained in some central location within a state or not. The firm should be responsible to provide these records promptly.
Lawrence M. Lowman
Chief Compliance Officer