From: HEP in SA [hpounds@satx.rr.com] Sent: Monday, October 06, 2003 11:13 AM To: SEC Rulemaking Subject: Rule 3110(f)--Choice of Law Provision (NASD-98-74) Dear Sirs: The purpose of this comment is to oppose the NASD's proposed amendment to Rule 3110[f]. The amendment would include subsection [f][4][B], allowing enforcement of a choice of law provision in arbitration. 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 amendment to the rule be rejected. Herb Pounds Herbert E. Pounds, Jr., P.C. 17890 Blanco Road, Suite 201 San Antonio, Texas 78232 210.492.7627 210.492.2915 (Fax) The information in the e-mail message is intended only for the personal and confidential use of the recipient named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of the message is not the intended recipient, you are hereby notified that you have received this message in error, and any review, dissemination, distribution, or copying of the message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail and delete the original message.