December 8, 1998

Jonathan G. Katz


Securities and Exchange Commission

450 Fifth Street, N.W., Mail Stop 6-9

Washington, D.C. 20549

Ref: File No. S7-26-98


National Planning Corporation (NPC) is an NASD member broker-dealer. We offer a complete range of products on a fully disclosed basis. We are registered in all fifty states and the District of Columbia. We are an affiliate of Jackson National Life Insurance, though the views expressed in this letter are solely NPCs.

We are deeply concerned with the latest proposal to revise the books and records requirements for broker-dealers. These rule revisions would force NPC and many other broker-dealers to significantly revise their operations. These rules would also have the effect of lessening competition by reducing the number of registered representatives in our industry.

Our primary objection is that there has been no demonstrated need for any material revisions to these rules. Nowhere has any state agency demonstrated any pattern by the broker-dealers of not making records available to aid in their investigations.

Complying with these proposed rules would require firms to archive large quantities of records in scattered locations around the country on the remote chance that a state regulator chooses to inspect that particular office. We find no meaningful cost-benefit analysis which would justify these rules. We believe the needs of state examiners could be met by defining clear time requirements for responding to requests for information. This would provide the benefits of centralized record keeping and yet provide an explicit obligation on broker-dealers to respond in a timely manner to state examiners.

As a last general comment, we point out that NPC, like many other firms is dealing with many issues relating to the Year 2000 and we are beginning to

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December 8, 1998

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address our responsibilities under OATS. The additional work required by these proposals would present a significant burden on our resources.

In the event the Commission chooses to go forward with these rules, we have comments on several specific provisions.

The requirement to provide copies of the customer account record within 30 days of opening the account should be modified to make explicit that if a customer is given a copy of their customer account record at the time the account is opened, the firm has complied with this requirement.

In addition, we suggest in the strongest possible terms that there be some alternative to mailing customer account records to clients on any scheduled basis. One option would be to require all securities account statements (including those issued by mutual fund and insurance companies) to include, at least annually, a "prominent" reminder for the client to contact their broker or the broker-dealer if their account record needs to be updated. No other group of professionals, including Registered Investment Advisors, is required to undertake this type of administrative burden.

We oppose the requirement that compensation records be maintained at the local office. Compensation is always a sensitive issue and individuals in the same office may be compensated in different ways. Broker-dealers need the flexibility to retain this information at their main office.

If the commission insists on implementing record keeping requirements for local offices, the definition of local office should be revised. One representative with a licensed administrative assistant should not be deemed a local office. We suggest that a minimum of 7 representatives be operating out of a location for it to be considered a local office. Any fewer and it is difficult to argue that the location is substantial enough to warrant extensive record keeping requirements. Note that if a location with fewer than 7 representatives is doing a substantial volume of business, it is likely to be

registered as a branch office or office of supervisory jurisdiction. Such locations are already subject to material record keeping requirements.



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December 8, 1998

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It is not practical to require that brokerage records not available in a local office must be delivered to securities regulators within three business days. For firms having many tens of thousands of paper-based records, responding

to the demands of state examiners may require 100 man-hours or more. This is especially true when state examiners request information which has been archived to off-site storage. Ideally, broker-dealers should have at least 10 days to respond to all requests for information. At a minimum, firms must have 10 days to produce records which are maintained in off-site storage and "promptly" must be defined as 5 days. It is important to remember that firms are not permitted to cease processing their normal daily business just because a state examiner is requesting historical business records.

It should be possible through Commission rule making to make it unnecessary to establish state record depositories. If broker-dealers had an obligation to respond to state examiner requests for information, national firms would be spared the significant expense of maintaining 51 state record depositories.

Finally, we believe that the Commission substantially underestimates the cost of complying with the proposed rules. In particular, the requirement to request that customers update their account records. Even customers who should not need changes to their account records will call with questions when they receive a mailing. We reiterate our preference for putting the burden on the customer to notify the firm of any necessary changes to their account records.

We appreciate the opportunity to make comments. We acknowledge the importance and value of having one set of books and records requirements which apply throughout the nation. It is our hope that the Commission continue to promote effective and efficient means for investors to participate in our capital markets.



Clifford Jack