From: Don Leufven [donl@law-acg.com]
Sent: Thursday, October 09, 2003 1:00 PM
To: rule-comments@sec.gov
Subject: NASD rule 3110 amendment comment; sr-nasd-98-74

Proposed Rule Comment from:
Don Leufven
600 Galleria Financial Center 
5065 Westheimer, Suite 600
Houston, Texas  77056
donl@law-acg.com
713-840-1492   Fax 713-840-0038

Dear Mr. Chairman and Members:

This comment is to oppose the NASD's proposed amendment to Rule 3110[f].  
The amendment would include subsection [f][4][B], allowing the enforcement 
of a choice of law provision in arbitration. I have represented investors in 
pursuit of claims for over 10 years and therefore know the impact on customers 
of this proposal.

The amendment allows brokerage firms located in New York or which are defending 
claims arbitrated with the New York Stock Exchange or which involve securities 
traded in New York to potentially impose  New York law on citizens of the other 
49 states simply by including an apparently innocuous choice of law clause in a 
new account agreement.  

This is a critical issue to investors with claims in arbitration.  Unlike most 
states, the state of New York has not adopted the Uniform Securities Act; and 
therefore, if the amendment is adopted, investors from other jurisdictions may 
be deprived of the protections afforded by their state laws.  These include 
statutory claims for misrepresentation and omission against all sellers and control 
persons. While these claims may be available under federal law, the state laws 
generally have a longer statute of limitations and do not allow many of the defenses 
which have been raised federally.  The state laws also provide for attorney fees 
which are not available under New York law or in federal statutes.  

Not only does New York not have a securities law which can be enforced by investors, 
there is case law in New York which may limit investor remedies under the common law.

The point is that investors are entitled to the protections available under their 
state laws.  National brokerage firms make the economic decision to operate in a 
given state.  They should not then be allowed to sneak a choice of law clause into 
a customer agreement that deprives customers of their rights in their own 
jurisdiction.

The purported objective of the NASD is to protect investors. This proposal does 
the opposite.  It protects the industry.  The fact that the proposal makes the 
amendment retroactive confirms its anti-investor bias.

I respectfully request that the rule be rejected.

Sincerely yours, 


Don K. Leufven