December 8, 1998

Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 5th Street, NW
Washington, DC 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 New Mexico Securities Division (the “Division”)
appreciates the opportunity to provide comment on the
reproposed amendments to Rules 17a-3 and 17a-4.  These
proposed amendments represent the first significant
amendments to the books and records requirements since the
passage of the National Securities Markets Improvement Act
of 1996 (NSMIA).  Because NSMIA eliminated the ability of
states to establish any books and records requirements that
differ from or are in addition to those established by the
Securities and Exchange Commission (the "Commission")
pursuant to the Securities Exchange Act of 1934, it is vital
that the Commission fully appreciate its new and enhanced
regulatory role.

Before the enactment of NSMIA, Commission rules concerning
books and records were cumulative of those established by
the states.  Many of the proposed amendments would simply
restore the regulatory landscape to the condition it was in
prior to the enactment of NSMIA, with the important addition
of nationwide uniformity.  For instance, with the exception
of records that would be required by paragraphs 17a-
3(a)(12), (a)(18), (a)(21) and (a)(23), all of the proposed
branch office record keeping requirements were generally
required by the Division’s rules.  Indeed, the rules that
applied before the enactment of NSMIA were in some ways far
more stringent in that New Mexico’s definition of a branch
office includes “any place of business in this state of one
or more licensed agents.”  SD Rule 86-2.01A.  Thus,
compliance with the proposed branch office record keeping
requirements should still be less expensive than compliance
with such requirements prior to enactment of NSMIA.

It has been suggested that the proposed amendments serve
only to make the job of the securities examiner easier at
the expense of the brokerage industry.  Although it is
indisputable that such records will improve the examination
process, it is also clear that many of the records that
would be required to be maintained at branch offices are
indispensable for meeting suitability obligations.  Without
an easily accessible and up-to-date record of a customer’s
securities holdings, transaction history, investment
objectives, income, etc., the suitability of a
recommendation depends more on luck than skill.  We urge the
Commission not to reduce investor protection by changing the
definition of branch office to exclude two person offices.

Some commenters have observed that the rules of the various
self-regulatory organizations already impose suitability
requirements and thereby argue that the Commission’s
proposed rules are unnecessary.  NSMIA does not appear to
permit states to enforce a self-regulatory organization’s
record keeping rules.  State securities regulators tend to
do more branch office examinations than other regulatory
entities, especially in states such as New Mexico, and it is
vital that they have meaningful and enforceable record
keeping rules.  The proposed rules would also provide
greater certainty to the brokerage industry about the types
of records that are necessary to meet the existing
suitability obligations.

The Division strongly endorses the Commission’s proposal to
require brokerage firms to provide a copy of the account
record to the customer within30 days of the opening of an
account.  Time after time, Division investigations have
revealed that boiler room-type brokerage firms mark the
customer’s investment objectives to match the type of
product they are selling (low priced, high risk, speculative
securities) rather than the actual objectives of the
customer.  Delivering a copy of the account information to
the customer will provide customers with an “early warning
indicator” that there may be a problem with their brokerage
relationship.  We know that some of the more responsible
firms already provide this information to their clients in
order to assure clear communication.  The cost of providing
such information should be insignificant since the firm will
normally send out a brokerage statement, confirmation
statement or other communication within the first 30 days of
the account opening.

We also endorse the proposal to require firms to record the
time when a purchase or sale order was actually received.
We suggest that the term “received” be defined for purposes
of this rule to mean the time when a representative of the
brokerage firm first received the order, rather than the
time when such order was “approved” by someone within the
firm.  The Division has encountered several instances where
brokerage clients have told their account representatives to
sell certain holdings; however, the order was delayed or
even ignored.  Testimony from former brokerage firm
representatives disclosed that they were required to get
special approval from one of the company’s principals before
the sell order could be executed.  These former
representatives stated that obtaining such approval could
take several days.

We agree with the observations of some commenters that the
proposed rules may not be appropriate for brokerage firms
that do not make recommendations.  Many of the proposed
record keeping requirements are designed to ensure that
recommendations are appropriate.  If no recommendations are
made, it would not be necessary to keep such records;
however, to the extent that such firms may make
recommendations in response to inquiries from clients, the
rules should apply.

In summary, the Division applauds the Commission’s efforts
to restore and to some extent improve the customer
protections that existed before the enactment of NSMIA.  We
do not believe that NSMIA-mandated uniformity was intended
to be achieved at the expense of investor protection.

Sincerely,



William J. Verant
Acting Director
New Mexico Securities Division