SCUDDER Scudder, Stevens & Clark, Inc. Two International Place Boston, MA 02110-4103 TEL 617 295 1000 FAX 617 295 1111 January 2, 1997 Mr. Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Re: Proposed Amendments to Broker-Dealer Books and Records Requirements (File No.: S7-27-96) Dear Mr. Katz: Scudder, Stevens & Clark, Inc. ("Scudder") appreciates the opportunity to comment on the amendments to the broker- dealer books and records rules under the Securities and Exchange Act of 1934 recently proposed by the Commission. Scudder is a registered investment adviser which has assets under management of more than $100 billion. Scudder's business interests include two subsidiaries: (i) Scudder Investor Services, Inc. ("SIS") organized in 1947, principle underwriter and broker-dealer of the Scudder and AARP Mutual Funds, and (ii) Scudder Brokerage Services, Inc. ("SBS"), an introductory discount broker on a fully disclosed basis. Scudder endorses the comments made by the Investment Company Institute in its letter of December 20, 1996 recommending that broker-dealers who serve as underwriters of investment companies and who do not recommend securities to the investing public be exempt from the proposed rule amendment 17a-3(a)(16). In addition, we believe many of the proposed record keeping requirements will impose an undue and unnecessary hardship on broker-dealer operations, such as ours and encourage you to consider an exemption for these organizations. We believe the very nature of our broker-dealer business and the types of services provided is unlike those businesses for whom the proposed rule amendments, premised in large- part on NASAA recommendations, are intended. ------------------------------------------------------------------------ Mr. Jonathan G. Katz January 2, 1997 Page 2 SIS' primary method of offering no-load Scudder and AARP Fund shares is through advertisements appearing in the newspapers and magazines. There is no commission derived from their sale. Typically investors contacts us on a toll- free line for a prospectus, which is mailed to them along with other descriptive material regarding the fund. The majority of the investment decisions are reached by the investors in the privacy of their own home. Investors with questions may call our a national toll-free line and speak with a registered representative located in Boston and Norwell, MA, Salem, NH, and/or San Diego, CA. In addition, walk in Fund Centers for investors are located in Boca Raton, FL, Boston, MA, New York, NY, Chicago, IL and San Francisco, CA. All of these locations are designated as registered branch offices of SIS with the NASD and all activities are supervised and/or monitored by the Office of Supervisory Jurisdiction located in Boston. Our representatives are salaried employees, do not offer advice or make recommendations, do not exercise discretion over customers' accounts and typically do not have significant, continued contact with any particular customer. SBS, located in Norwell, MA, offers reduced commission rates on unsolicited trades of mutual fund shares and individual securities through direct mail advertisements. Investors contact us on a toll-free line. Investment decisions are made by the investor. SBS representatives are salaried and do not receive any commissions, do not offer advice or make recommendations, do not exercise discretion over customers' accounts and typically do not have significant, continued contact with any particular customer. Customer accounts are held by a clearing broker, Pershing, on a fully-disclosed basis. Neither SIS nor SBS representatives function in a capacity similar to the traditional broker. SIS and SBS representatives act as transaction facilitators or "order takers." There is no on-going relationship between "broker" and customer. Therefore, application of the proposed rule amendments appears both burdensome and unnecessary. We would argue that the proposed amendments are too broadly written and thereby fail to address the useful purpose NASAA had intended them to. In fact, over the past 30 years, I have had numerous conversations with NASAA officials and State Securities Administrators regarding their concerns with the securities industry. These officials have consistently stated that their concerns generally, and this proposal specifically, are not directed at organizations such as ours. Further, when applied to direct marketers, the amendments seem to require the duplication of a centralized supervisory structure our industry has spent years organizing and implementing. ------------------------------------------------------------------------ Mr. Jonathan G. Katz January 2, 1997 Page 3 We would encourage you to consider exempting "direct market" broker-dealers and fully disclosed discount brokers from the proposed rule amendments. Should you have any questions regarding our comments above, please call the undersigned at (617) 295-2167. Sincerely, Thomas W. Joseph Principal