December 26, 1996
     
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW, Stop 6-9
Washington, DC  20549
     
RE:     Proposed Amendments to SEC Rules 17a-3 and 17a-4 (File No. S7-27-96)
     
Dear Mr. Katz:
     
Reference is made to the above captioned matter and pages 55593-55601 of 
Federal Register Volume 61, No. 209 in which the proposed amendments 
appear.
     
First, a little background on the firm I represent and myself.  I 
currently function as Assistant Director of Compliance of Commonwealth 
Equity Services, Inc. ("CES"), a nationally registered, NASD member, 
independent broker-dealer firm located in Waltham, Massachusetts.  CES 
serves the needs of over 600 registered representatives and their 
clientele.  CES registered representatives offer their clients access to 
investment opportunities in a full range of financial products including 
mutual funds, variable annuities and individual stocks and bonds.
     
CES has the following comments concerning the proposed amendments:
     
New Account Forms
     
The proposed rule 17a-3(a)(16) requires broker-dealer firms to obtain a 
new account form for each customer account.  This account form would 
include basic identification and background information about the 
customer.  Clients would be asked to designate investment objectives and 
to specify an approximate percentage of investment capital that the 
customer would like to allocate to "speculative" investments.  In 
addition, broker-dealer firms would be required to forward to the client 
a copy of the account form or an alternative document that summarizes 
the data contained therein.  Lastly, the proposed rule would require 
broker-dealer firms to update client investment objective data annually.
     
CES has the following objections to the new account form proposal:
     
        (1)     Most, if not all, broker-dealer firms already insist upon the
completion of new account forms.  Individual firms have, through 
experience, developed new account forms which are tailored to the needs 
of their representatives, compliance personnel and, most importantly, 
clients.  Standardization of the content of new account documentation 
may sacrifice the quality of data obtained through their use.  CES would 
suggest that the amendment simply require a new account form without 
specifying content.
     
        (2)     In addition, requiring firms to obtain the SEC prescribed form
from
every existing client will prove to be a burdensome task requiring a 
great deal more effort than the five minutes the SEC estimates. 
Compiling client lists, preparing a mailing of new account forms to 
clients, tracking the receipt of completed forms, chasing after clients 
who have not responded, answering confused client's questions, etc. will 
be an extremely time consuming and expensive task.  Even with the one 
year time frame proposed, broker-dealers will be hard pressed to collect 
completed new account forms from all existing clientele.  CES would 
suggest that this requirement be imposed on a "going forward basis" 
only.
     
        (3)     Next, rather than require brokerage firms to send copies of the
new
account form to clients, why not require clients to sign the completed 
new account form?  This is already a widespread industry practice as 
most new account forms also serve as a brokerage services contract and 
include an arbitration clause.  This practice would achieve the same 
regulatory goal while reducing the amount of paperwork generated in the 
opening of client accounts.
     
        (4)     Lastly, requiring annual updates of account information again
places too large a burden on the brokerage community.  The proposed 
amendment would, in effect, require each representative to contact each 
client annually solely to determine if changes have occurred.  This 
obligation would never expire.  This appears to be overkill as clients 
become irritated when asked for the same information again and again. In 
addition, some clients merely open an IRA or other account and never do 
business with the representative or firm again.  It would appear to be a 
waste of the representative's time to contact this client annually to 
determine if his/her investment objectives have changed.  CES suggests 
that broker-dealers be required to update new account information 
whenever they are informed of a change in their clients' investment 
objectives.  Further, client statements could include language that 
reminds clients to contact their representative should their objectives 
change.
     
Activity Reports
     
Proposed Rule 17a-3(a)(19) would require activity reports to identify 
exceptional numerical occurrences such as frequent trading in customer 
accounts, unusually high commissions, or an unusually high number of 
trade corrections or canceled transactions, for management's attention 
and information.  Broker-dealers must be able to promptly create or 
recreate the required activity reports upon request by representatives 
of a securities regulatory authority.
     
CES has the following objections to the activity report proposal:
     
        (1)     The activity reports required may or may not be applicable to an
individual firms business activities.  CES suggests that the proposed 
rule changes require firms to keep and maintain activity reports which 
are reasonably designed to detect exceptional occurrences worthy of 
additional compliance review.
     
        (2)     These requirements also place an undue burden upon the resources
of
small firms to keep and maintain these compliance exception reports.  A 
firm like CES is at the mercy of its clearing firm when comes to the 
availability of certain data concerning trading activity.  Currently this 
data is only made available for a 30 day period.  Perhaps the 
requirements could be altered to require that such reports be maintained 
for 30 days only.
     
Local Office Records
     
The proposed amendments to Rule 17a-3 would require broker-dealers to 
generate local office blotters, to record supplemental information on 
brokerage order tickets, to create and keep customer account forms and 
to maintain a number of additional records concerning associated 
persons, customer complaints, and exceptional numerical occurrences. 
The proposed amendments to Rule 17a-4 would require broker-dealers to 
make available certain records in each of their local offices.
     
CES has the following objection to the local office records proposal:
     
        (1)     Many of CES' representatives work in one-man offices.  The
proposed
rule would place an extremely large book and recordkeeping burden upon 
these small branch offices.  Hard working, honest registered 
representatives will be faced with the choice of making a living or 
fully complying with these recordkeeping requirements.  With the 
availability of fax machines and overnight mail services, these records 
could easily be maintained at the broker-dealer's home office and still 
be provided to regulators within a reasonable time frame.
     
In summary, while the proposed amendments may in fact prove somewhat 
valuable to state regulators during examinations and enforcement 
proceedings, they would place an enormous administrative burden upon 
broker-dealer firms.  This burden would be especially heavy upon medium 
and small sized broker-dealer firms, and their representatives, whose 
resources are limited.  In the end, the proposed amendments would saddle 
all broker-dealers with extensive and cumbersome administrative 
requirements that will put these smaller firms at a serious competitive 
disadvantage.  Reducing competition in the brokerage services market 
seems a large price to pay for a small gain in state examination 
efficiency.
     
Sincerely,
     
     
     
David T. Bellaire, Esq.
Assistant Director of Compliance
Commonwealth Equity Services, Inc.
One University Office Park
29 Sawyer Road
Waltham, MA  02154-3423