HBK Investments L.P. 777 Main Street, Suite 2750 Fort Worth, TX 76102 Telephone 817-870-6160 Facsimile 817-870-6177 December 23, 1996 Johathan G. Katz Secretary Securities and Exchange Commission Washington DC 20549 By Email to Rule-comments@sec.gov Re: File No. S7-27-96 Background- We manage an investment partnership which has a wholly owned subsidiary that is a registered broker/dealer with the NASD as its SRO. The broker/dealer's activity is virtually all proprietary trading for our own account. There are less than 80 customers and all of them are either employees, partners or affiliates of partners. All such accounts are fully disclosed, introduced accounts cleared through another broker/dealer. All of the accounts are an accommodation to the account owner and commissions are set at a nominal level. There is no solicitation of accounts nor of activity in the existing accounts. The broker/dealer simply executes orders placed by the customers and no advice is offered. All commission income earned on the customer transactions is retained by the broker dealer. Associated persons' compensation is completely unrelated to the customer business or lack thereof. A customer transaction may be executed by any one of several associated persons and is no! t identified by associated person since no commissions are paid and compensation is unaffected by any commissions earned on a customer trade. Comment re exemptions- It would seem that the absence of traditional broker/dealer activities or functions in firms such as ours might also be applicable to a small but still significant number of firms. It would seem appropriate to have a rule for such a broker/dealer whereby it could prepare a memorandum documenting its practices and conditions substantiating why certain rules were not necessary in its circumstance and submit such memorandum to its SRO. Absent an obvious misrepresentation, the broker/dealer would immediately be exempt from such rules which exemption could be modified or nullified on a prospective basis upon examination by the SRO. In the case of our broker/dealer, the suggested exemption process would apply to: 17a-3(a)(6) No orders are solicited. Tickets indicate which associate executed the order, but such is not captured in the accounting system since it has no relevance to us. 17a-3(a)(20) No associate is identified with or exclusively serves a particular customer. To maintain such would be an unnecessary burden. 17a-3(a)(18) No associate is compensated in whole or in part by any commissions earned by the firm. 17a-3(a)(16) Since no orders are solicited, we question whether it is pertinent to maintain a record of a customers objectives and whether when the customer calls in an order, to ascertain whether he is doing a transaction that meets his objective. It does or he wouldn't place the order. Comment re customer's objectives: As indicated in the proposed rule, a customer's objectives may change, not only over time, but also from trade to trade. And there are circumstances where an identical trade could fit under different objectives. Further, the rule presumes that customers will have an organized and regimented financial plan and follow it religiously when in fact many do not or at least it is not obvious. Further, a customer could have multiple accounts with different brokers. Unless this rule is an effort to legislate that a customer must have pre-defined objectives and be forced to follow them by his broker's policing his account (which in my view is not within the perview of the SEC or the government), there should be a more effective mechanism to prevent or detect unscrupulous brokers from selling inappropriate securities to a customer. It may be that the arbitration process or the courts are still the most effective method for dealing with brokers and their firms who step out of line,! rather than burden (1) the whole system with record keeping requirements of somewhat questionable value, (2) the SROs with audit requirements and (3) undoubted disputes between firms/brokers and SRO's over nebulous matters that cannot be readily resolved short of arbitration or the courts anyway. Very truly yours, H. Michael Reese Chief Financial Officer