Commerce Bancshares, Inc.
Regulatory Compliance Department
P.O. Box 13686
Kansas City, MO 64199-3686

December 5, 2002

Via e-mail to:

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-41-02
Proposed Rule: Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934
Release No. 34-46745; 67 Federal Register 67496-67507 (November 5, 2002)

Dear Mr. Katz:

The Compliance Department of Commerce Bancshares, Inc. appreciates the opportunity to comment on the above-referenced Proposed Rule ["Rule"] issued by the Securities and Exchange Commission ["Commission"].

Commerce Bancshares, Inc. ["Commerce"] is a registered bank holding company with total assets of $13.2 billion as of September 30, 2002, and four bank subsidiaries. Three of these banks are retail banks, with approximately 197 branches in Missouri, Illinois, and Kansas. The other bank is a limited-purpose bank, with one office in Omaha, Nebraska. All of the banks are national banks. Commerce provides trust services through trust divisions in each of the three retail banks, and provides broker-dealer services, primarily to institutions, through a separately-identified department of one retail bank. Commerce also provides brokerage services through Commerce Brokerage Services Inc., a registered broker-dealer with approximately 65 employees in offices in 3 states.

We thank the Commission for extending the temporary exemption of banks from the definitions of "broker" and "dealer" until May 12, 2003 and February 12, 2003, respectively.

We note that the Rule addresses narrow, albeit important, issues, and that other matters remain to be addressed in future Proposed Rules.

The Commission specifically requested comment on the timing of the final implementation of this proposal, and we offer the following in response.

We believe many banks will be affected significantly by the replacement of the blanket exemption from the definitions of "broker" and "dealer" with the functional exceptions incorporated in amended definitions of those terms. We believe that until the Commission issues final amended definitions of both "dealer" and "broker" under the Exchange Act, many banks will be unable to make a thorough analysis of whether or not the securities activities in which they currently engage are permissible under banking law, fall under the Commission's general definitions of "dealer" or "broker", or are exempted from the dealer registration requirements under the Exchange Act.

The changed definitions will require banks to re-evaluate their delivery channels for trust and investment services (including bank broker-dealer departments and registered broker-dealers, whether or not the bank's affiliate). These generally use computer systems and operational procedures unique to the delivery channel, and often have different service providers with whom they deal. We will need additional time to assess all our securities-related activities and to effectively organize and implement the transition of activities to the appropriate entity. For example, the assimilation of "dealer" activity by our broker-dealer affiliate could result in significant changes for the broker-dealer (e.g., potentially higher net capital requirement, changes to back office operations, trading desk staffing) because Commerce's affiliate broker-dealer has not previously engaged in principal "dealer" activity.

Accordingly, we request that the Commission further extend the temporary exemption from the revised definition of "dealer" and conform the "dealer" extension period to the "broker" extension period.

We further request that the Commission provide an extended comment period for additional Proposed Rules in order to permit bankers, many of whom are not fully conversant with the securities rules being amended, to fully analyze the proposals and provide constructive comments.

We also request that, when the Final Rules covering the definitions of both "dealer" and "broker" are issued, the Commission provide banks a transition period of at least one year to bring our operations into compliance with those new rules.

We appreciate the opportunity to provide what we hope are constructive comments.

Sincerely yours,

Jeffrey S. Missman
Vice President
Compliance Director