Oct. 24, 2018
Comment regarding the Security and Exchange Commission’s Proposed Regulation: Amendment to Single Issuer Exemption for Broker-Dealers [Release No. 34-84225; File No. S7-21-18] My firm, Sharemaster, is a one-person sole proprietorship. The only business conducted is acting as an agent for redeemable mutual funds and variable insurance products. The firm does not engage in underwriting, nor does the firm hold or owe customer funds or securities. Transactions are conducted by means of a mutual fund or insurance company application form. Customer checks are made payable to the mutual fund or insurance company. Applications and checks are promptly sent to the company. The firm conducts a limited business, as described above, under the Exemptive Provision of SEC Customer Protection Rule 15c3-3(k)(1)(i), (k)(ii)(a), and (k)(iii). Sharemaster requests that the proposed regulation be amended to allow such limited business firms to file an annual report prepared by an independent public accountant (CPA), but not necessarily registered with the Public Company Accountant Oversight Board (PCAOB). Since the Commission’s proposed amendment limits the exemption’s use to a broker-dealer acting for a single issuer, and each mutual fund in a family of mutual funds is considered an issuer, the proposed amendment would block the use of the exemption for firms that do not hold or owe customer funds or securities and act as an agent for mutual funds. The single issuer restriction forces limited business firms, operating under a SEC Rule 15c3-3 exemption, to hire a PCAOB-registered accountant. For a small firm like Sharemaster, the cost of compliance is an onerous burden. In fact, increased PCAOB requirements make the cost unaffordable for the firm. A limited broker-dealer is unlike firms that underwrite securities, hold securities and funds, and make public disclosures. Sharemaster receives pre-determined mutual fund commissions and survives on a thin profit margin. The firm provides personalized service to customers and has a valuable place in the community of broker-dealers. In 1957, when the Commission first granted the exemption, it applied to a broker who limits business to soliciting subscriptions as an agent for issuers, transmits funds and securities promptly, and has not held or owed customer funds or securities. The Commission described this type of broker-dealer as “. . . one who would have been exempt during that entire period from the Commission’s aggregate-indebtedness-net-capital ratio rule 15c3-1 . . .” [23rd Annual Report of the Securities and Exchange Commission, Fiscal Year Ended June 30, 1957, p.31, attached]. The need for this exemption for a limited broker-dealer is as great now as it was in 1957. Sharemaster urges the Commission to amend the current proposal to include an exemption for limited business broker-dealers. Respectfully submitted, Howard Feigenbaum, Sharemaster