COMMISSIONER-CHAIRMAN RENZ D. JENNINGS COMMISSIONER CARL J. KUNASEK COMMISSIONER |
EXECUTIVE SECRETARY VICTOR RODARTE ACTING DIRECTOR SECURITIES DIVISION 1300 West Washington, Third Floor Phoenix, Az 85007-2996 TELEPHONE: (602) 542-4242 FAX: (602) 594-7470 |
The "Local Office" Definition
The Division generally is supportive of the re-proposed definition of "local office" under 17a-3(g). Many times, the Division’s examinations of these offices are frustrated by the lack of books and records. In fact, while we recognize the utility of compromise, we urge the SEC to reconsider its originally proposed definition of "local office," which includes offices with one or more associated persons. The number of associated persons is almost irrelevant to the underlying concern of investor protection. Obviously, a single individual can do more damage than two. As such, we believe that an office with only a single associated person should be held to the same standards – and, in this case, requirements – as offices with two or more persons.The Local Office Retention Requirements
We do applaud the SEC for identifying areas where flexibility does not undercut the regulators’ objectives. An example of this balance is found in the record retention requirements in 17a-4(k)(1) and (2). The re-proposed retention requirements allowing the dealers to store records in electronic formats that are most appropriate and cost effective for their firms should also allow for the necessary flexibility in maintaining these records.Customer Account Records
Re-proposed Rule 17a-3(a)(16) is also noteworthy. This rule requires, among other things, that broker-dealers create and maintain records of each customer account and forward those account records to customers for verification after first opening the account, and then every 36 months or each time certain information is changed.Customer Complaints
The Division is in agreement with re-proposed Rule 17a-3(a)(17), which contains new provisions that, as we understand them, would require broker-dealers to maintain a customer complaint file consisting of all correspondence, memoranda, and other documents regarding particular customer complaints. The broker-dealers would have to maintain for each local office a record of written complaints against each "associated person" that conducts business at the local office. The Division believes that this requirement will assist regulators in their efforts to identify patterns of sales practice abuse by particular dealers and salesmen, as well as abuses concerning specific securities.VR/eb