February 20, 1997

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

Re: Rules Implementing Amendments to the Investment Advisers
Act of 1940 (File No. S7-31-96)

Dear Mr. Katz:

Massachusetts Financial Services Company ("MFS") appreciates the opportunity to comment on the Commission's proposal to adopt rules under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), in order to implement certain provisions of the Investment Advisers Supervision Coordination Act (the "Coordination Act").

MFS is an investment adviser registered with the Commission pursuant to the Advisers Act and manages a broad variety of open-end and closed-end investment companies, variable annuity products, institutional funds, and accounts for large institutional clients. MFS Institutional Advisors, Inc. ("MFSI") is an investment adviser registered with the Commission pursuant to the Advisers Act and is also registered in several states. MFSI provides investment management services exclusively to large institutional investors, including high net worth individuals. The history of the MFS organization dates to 1924 and the founding of America's first mutual fund, Massachusetts Investment Trust. The MFS organization now manages over $54 billion on behalf of over two million investors worldwide.

As a general matter, MFS is very supportive of the Commission's proposed rules, and believes that they appropriately allocate regulatory responsibility between the Commission and the states consistent with Congress' intent as evidenced in the Coordination Act. We would suggest, however, that certain of the proposed rules should be clarified or revised in certain respects, as is set forth in greater detail in the comment letter, dated February 10, 1997, filed by the Investment Company Institute (the "Institute") with the Commission. We support each of the recommendations made by the Institute, and we specifically note the following significant recommendations:

• We strongly recommend that proposed Rule 203A-2(c) be revised to eliminate the "same address" requirement that would form part of the proposed exemption for affiliated advisers. As the Institute noted, the "same address" requirement would impose unnecessary burdens on investment advisers without serving any regulatory purpose. This requirement could frustrate advisers in their efforts to locate their advisory subsidiaries in geographic locations, other than the principal office, which are most attractive in view of various client, work force, tax, corporate, operating expense, and other considerations. Advancements in technology (e.g. the use of electronic mail, facsimiles, teleconferencing equipment, etc.) make it quite easy for various affiliated investment advisers to integrate completely their internal recordkeeping, compliance, legal and supervisory functions.
• MFS fully supports the Commission's effort to define the term "investment adviser representative", but concurs with the Institute that the proposed definition should be clarified and refined in order to limit its scope to the "retail" activities that are the principal concern of Congress and NASAA. More specifically, we agree with the Institute that wealthy individuals (i.e. those meeting the criteria set forth in Rule 205-3 under the Advisers Act) ought to be excluded along with other institutional investors. Such individuals are far more similar to corporate institutional investors (in terms of their sophistication, access to expert advisers, and lack of need for expansive regulatory protection) than they are to typical individual investors that were the focus of various members of Congress and NASAA.

Second, for purposes of determining whether a "substantial portion" of an investment adviser representative's business consists of "retail" business, we would recommend that the test be 10% of such representative's clients, rather than a percentage of assets under management. We agree with the Institute's statement that the imposition of an additional asset test would result in significant additional compliance burdens for advisers but would result in very few, if any, additional investment adviser representatives being subject to state regulation.

Third, we agree with the Institute's recommendation that an investment adviser representative who already is registered as a broker-dealer representative should be exempt from state registration as an investment adviser representative. Most of MFSI's investment adviser representatives are registered as broker-dealer representatives with the NASD and with some or all of the state securities commissions. As broker-dealer representatives, these employees already are subject to various state competency and examination requirements, and it would serve no additional regulatory purpose to require their dual registration as investment adviser representatives.

• As the Commission has noted, interpreting the term "place of business" to be the equivalent of "doing business" would have the effect of nullifying the restriction that the inclusion of such term in the Coordination Act places on a state's authority to regulate investment adviser representatives. However, we believe that the Commission's proposed interpretation of the term "place of business" is inappropriately expansive. MFS agrees with the Institute that the term ought to be defined in its traditional sense, i.e. a physical location that is held out to the public through a telephone listing, building directory, business card, stationary, advertisement, contractual reference or otherwise.

Sincerely

Robert T. Burns

cc: Stephen E. Cavan
James F. DesMarais
Amy Lancellota
(Investment Company Institute)
Arnold D. Scott