From: Amy.Owens@mutualofomaha.com Sent: Tuesday, January 06, 2004 5:38 PM To: rule-comments@sec.gov Subject: File No. SR-ISE-2003-34 Mutual of Omaha Investor Services, Inc. ("MOIS"), is respectfully submitting this comment in reference to the proposed changes to the branch office requirements as defined under SEC release No. 34-48897: The proposed branch office definition will require us to register all of our current non-branch locations with both the NASD and the states where they are located. This will increase the cost of doing business due to increased NASD and state registration fees as well as the costs associated with increased supervision and oversight. We do not anticipate that we would gain any financial benefit or savings from the proposal nor any improvement in our existing supervisory procedures. MOIS is a wholly owned subsidiary of the Mutual of Omaha Insurance Company ("Mutual") and is a limited scope broker-dealer with approximately 125 home office registered representative and 980 field registered representatives. MOIS was formed to be the broker-dealer for Mutual's agency distribution system and only career agents are registered through MOIS. While the field management and division office support staff are comprised of employees of Mutual, the career agents are all independent contractors. All registered representatives are assigned to one of Mutual's 57 Division Offices (based on the rep's location) located in all 50 states, Puerto Rico and the Virgin Islands. The Companies also maintain approximately 75 District Sales Offices which are offices located in a Division Office territory. Approximately 28% (272) of all registered representatives work out of remote sites in non-Mutual of Omaha offices. MOIS does not hold out these locations to the public as Branch Offices (as defined under Rule 3010(g)(2)) and does not perform any of the functions of an OSJ or Branch Offices at these locations. MOIS has one OSJ which is located in the Home Office in Omaha, Nebraska. If the proposed amendments are adopted, the designation of an office location as a Branch Office would no longer be based on the holding out standard. Under current rules, our Division Offices, District Sales Offices and Remote Offices (over 400 locations) are not held out to the public as Branch Offices nor are any of the functions of a Branch Office (as defined in rule 3010(g)(2)) performed at these locations. All MOIS materials (letterhead, business cards, advertisements, sales literature, etc.) clearly disclose the one OSJ located in the Home Office in Omaha. This helps ensure that any customer questions or complaints are directed to one location and that such inquiries are handled in a uniform, timely fashion. This also ensures that any disclosures required to be made to the NASD are also reported within prescribed time parameters. Adoption of the proposed amendments will have a significant impact on MOIS in the following areas: · NASD Registration Fees for Branch Offices. Under the definition of Branch Office in the proposed amendment, MOIS would be required to designate over 400 locations as Branch Offices. Designating these locations as Branches will require MOIS to pay a fee to the NASD to register each location and an annual fee as long as the office is open. Because of the large number of office locations and the constant changes that will occur with U4 and U5 processing, the expense of these NASD fees as well as administrative expenses could be considerable. · Increased State Fees for Registration as Branch Offices or Foreign Corporations. State regulations defining Branch Offices are separate from NASD regulations. MOIS is required to pay state registration fees in some states for maintaining locations that are considered Branch Offices as defined by state law. Additional state registrations would undoubtedly be triggered with broadening the NASD definition. There is also a concern that MOIS would be subject to state income tax reporting obligations for business sold in that state. This will increase the cost of these locations significantly. We do not feel the primary residence exemption or the location, other than a primary residence, that is used for securities business for less than 30 business day in any one calendar year, provides any relief from the registration requirement based on item (B)(iii) Neither customer funds nor securities are handled at that location. To process new business, MOIS' representatives complete the necessary paperwork and receive a check from the customer. All checks received from customers are made payable to a third party and MOIS forwards that check to the respective transfer agent for deposit and processing. To ensure that all funds are transmitted expeditiously, we require all business locations to record all checks received from customers into a Checks Received and Delivered Blotter showing dates received and dates forwarded to the OSJ. The NASD has already provided us with guidance that we would not be eligible for this exemption because of the potential handling of customer checks in all business locations. In conclusion, MOIS does not feel that the change proposed should be adopted. Adoption of the proposed change would cause MOIS to incur considerable additional expense, increase our record keeping efforts and create additional burdensome requirements that do not seem necessary. MOIS will not realize any benefit from the proposed change. In addition, we do not believe that the additional administrative requirements that have been proposed will benefit our customers or the general public by increasing the expenses related to record keeping and filing.