Commerce Bancshares, Inc.
Regulatory Compliance Department
P.O. Box 13686
Kansas City, MO 64199-3686

July 17, 2001

Via e-mail to:

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-12-01, Interim Final Rules - Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Release No. 34-44291, 66 Federal Register 27760 (May 18, 2001)

Dear Mr. Katz:

The Compliance Department of Commerce Bancshares, Inc. appreciates the opportunity to provide comments on the above-reverenced Interim Final Rules ["Rules"] issued by the Securities and Exchange Commission ["SEC"].

Commerce Bancshares, Inc. ["Commerce"] is a registered bank holding company with total assets of $11.7 billion at March 31, 2001, and four bank subsidiaries. Three of these banks are retail banks, with approximately 340 locations in Missouri, Illinois, and Kansas. The other bank is a limited-purpose bank, with one office in Omaha, Nebraska. All of the banks are national banks.

Commerce provides brokerage services through Commerce Brokerage Services Inc., a registered broker-dealer with approximately 65 employees and offices in 3 states.

Commerce provides trust services through trust divisions in each of the three retail banks. Collectively, these trust divisions are known as The Commerce Trust Company ["CTC"]. CTC provides fiduciary and investment services to institutional, corporate, mutual fund, and personal customers, with managed and non-managed assets as of March 31, 2001 totaling $15 billion.

We believe various provisions of the Rules will have serious adverse effects on the trust activities of banks. We further believe that compliance with the Rules will be very difficult. In brief, we believe the issuance of Interim Final Rules with an immediate effective date but a brief, temporary suspension of the Rules' effectiveness, provides inadequate time for banks to analyze the consequences of the Rules and to implement the changes necessary to comply with their provisions. Because the Rules were issued without the normal notice and public comment period, banks did not have the opportunity to perform such analyses during the comment period and, thus, become at least partially prepared for the necessary changes.

We are concerned that the Rules do not address the effect of the Exchange Act on a bank that discovers that some of its securities transactions do not comply with any exemption because of inadvertent errors or unforeseen circumstances. We believe the SEC should add appropriate provisions that make it clear that a bank that attempts in good faith to conduct its securities activities in conformance with the rules, and that has implemented policies and procedures reasonably designed to achieve such compliance, will not be considered a broker-dealer if it determines that some of its securities transactions do not meet an exception.

We also believe that the SEC should add provisions that provide such banks with a reasonable period of time to cure inadvertent or unforeseen violations. The cure period should be sufficiently long for the bank to take appropriate action to determine the cause of the violations and to implement adequate corrective actions.

We note that the Rules do not address the scope of all the exceptions to the definitions of broker and dealer in the Exchange Act. We request that the SEC propose for comment rules that address the scope of each of the broker and dealer exceptions.

We are especially concerned about the lack of guidance concerning the applicability of NASD Rule 3040 to "dual employee" arrangements in which personnel serve as employees of both a bank and an affiliated broker-dealer. We strongly request that the SEC issue guidance that clarifies that NASD Rule 3040 does not apply to dual employees operating in their capacity as bank employees when effecting securities transactions pursuant to the exceptions.

Because of the Rules' lack of clarity on the matters described above, and their substantial impact on banks' business practices, we urgently request the SEC to take immediately whatever steps are necessary to formally change the Interim Final Rules to proposed rules. We also request the SEC to issue additional proposed rules covering the matters discussed above and the concerns raised by other commenters.

We further request that the SEC provide an extended comment period for the proposed rules in order to permit bankers, many of whom are not fully conversant with the SEC rules being amended, to fully analyze the proposal and provide constructive comments. We believe the SEC should immediately extend the effective date of the Gramm-Leach-Bliley Act's "Push-out" provisions until after the proposed rules are issued as final rules. We also request that the SEC provide banks a lengthy transition period (at least one year) after the revised rules become final to bring our operations into compliance with those new rules.

We appreciate the opportunity to provide what we hope are constructive comments on the Rules.

Sincerely yours,

Jeffrey S. Missman
Vice President
Director - Regulatory Compliance