Subject: File No. S7-29-98 December 14, 1998 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Re: File No. S7-29-98 Dear Mr. Katz: Ragen MacKenzie Incorporated is a regional broker dealer and member of the New York Stock Exchange, Inc. We favor the type of relief which would be provided by the proposed exemptions. Commission rulemaking in the last decade has not rendered the proposed exemptive relief unnecessary or inappropriate. Some of our U.S. retail clients are unhappy because they are presently being excluded from an exchange offer in a multibillion dollar international transaction. The issuer has a limited percentage of U.S. retail shareholders and is not registering the offer in this country. U.S. retail shareholders were offered $16 per share. International shareholders are being offered their choice of $16 per share OR stock in the successor company. Shortly after the offer was announced, the stock held by U.S. investors began trading slightly above $16. The legally favored international investors were able to purchase the shares from the unfortunate U.S. retail investors, recognizing the downside risk in the stock was to the cash offer of $16 but that as an international investor, they could participate in all of the upside potential of the successor company. If the shares of the successor company increase before the deal is consummated, there is the potential for a profitable arbitrage by international investors which can purchase the shares of the target company and convert them into shares of the successor company. This potential for international investors to take advantage of the U.S. shareholders by paying them less than the international value of their U.S. holdings, is caused by the U.S. securities regulations. This "favored" group, international investors, would be able to profit from the misfortune of the U.S. retail investors who can not convert their stock. To the companies involved, each of which had several billion dollars (U.S.) in market capitalization, the U.S. retail shareholders were only a small percentage of the outstanding shares. They did not want to subject the entire transaction to the extra expense and possible delays involved in complying with U.S. securities laws. As a result, U.S. retail investors are forced to sell their stock in the open market and incur a commission charge - or be cashed out - recognizing a gain (or loss) for tax purposes. If they wish to acquire equity in the successor international entity, they have to make a purchase on the open market, incurring a commission charge on the purchase. Meanwhile, international shareholders are able to convert their shares on a tax free basis into the new entity without incurring any commission costs. Large U.S. institutional investors often are able to participate overseas in attractive international mergers or exchange offers through the existence of offshore offices and thus may not need the proposed exemptions. The main group the Commission should seek to help is the retail U.S. investor. In the final rule, holdings of U.S. institutions such as mutual funds, etc. should be permitted to be excluded from the calculation in determining the percentage of shares permitted to qualify for the exemption. Otherwise, you will continue to have the same unfortunate result if the threshold is 10% and U.S. institutions hold 10% of the outstanding shares and small investors hold only 3%. If the combined total of U.S. retail and institutional holdings is over the threshold you set, U.S. institutions may be able to participate offshore through offshore offices, while the retail U.S. investors will continue to be excluded. We favor higher, rather than lower, percentage limitations on U.S. ownership in order to qualify for the exemption. The more restrictions on transferability of the securities and the more conditions which the Commission imposes on foreign issuers to comply with the proposed exemption, the more likely they will continue to avoid making the offer in the U.S., perpetuating the inequitable treatment of U.S. shareholders. To the extent the final rule increases the potential for litigation in the U.S. which could delay an international transaction, the rule is less likely to be used. In some cases, the present Securities and Exchange Commission regulations result not in "investor protection" but rather harm to U.S. retail investors who are forcibly cashed out of their holdings while excluded from the opportunity to receive stock of the successor company in international exchanges or mergers. The present regulations disadvantage the very investors they are supposed to protect. Sincerely, Ragen MacKenzie Incorporated Michael W. Reinhardt House Counsel MWR:ch