From: Julie Gebert [jjgebert@unitedplanners.com] Sent: Friday, October 03, 2003 1:06 PM To: rule-comments@sec.gov Cc: Tom Oliver Subject: SR-NASD-2002-162 Amendments to Proposed Rule Change Importance: High October 3, 2003 Jonathan G. Katz Secretary United States Securities and Exchange Commission 450 Fifth Street, NW Washington DC 20549-0609 RE: File No. SR-NASD-2002-162 Amendments to Proposed Rule Change Dear Mr. Katz: United Planners' Financial Services of America ("UPFSA") is a fully disclosed retail broker-dealer registered to conduct business in all domestic jurisdictions, with over 350 registered representatives offering securities through nearly 100 offices of supervisory jurisdiction. UPFSA is a subsidiary of Pacific Select Distributors, a subsidiary of Pacific Life Insurance. Please accept this letter in response to the request for comments with respect to SEC Release 34-48298 and file no. SR-NASD-2002-162. As the Director of Compliance for UPFSA, I appreciate the opportunity to comment further on the proposed NASD amendments relating to Supervisory Controls. First, I appreciate the NASD and SEC recognizing the initial proposal did not advance investor protection with respect to the need for reviews of independent branch offices to be performed by "independent" examiners. As many commentators pointed out, the "independent" requirement could have diminished the effectiveness of many firm's supervisory systems. Further, most firms already have compliance departments that are independent from sales and marketing activities, but are more familiar with firm practices and procedures and can bring important experience to the examination process. It would be a waste of these valuable resources if firms were forced to hire or contract independent examiners. While I agree with the majority of the proposed new rule, I am concerned about two new concepts introduced by the amendment: the proposed inspection requirement of non-branch business locations and the requirement for additional forms of review with respect to producers accounting for more than 20% or more of the income for a branch office manager. I believe that any office of a registered representative at which records are retained or regular operations occur are currently required to register as branch offices. Just because a registered representative occasionally meets customers at home or other locations does not justify requiring that such locations be subject to inspection requirements. I would request section (1)(c) be stricken from the proposal or that much more detail be provided to clarify what records and/or type and level of activity must be involved before inspections of a "non-branch" location are required. With respect to the 20% threshold, I agree with the concept that a broker-dealer should take overrides and other forms of compensation into consideration in determining that their branch examination program is adequate. I am troubled by the proposal to create an absolute number for the following reasons: 1. Compensation can take many forms; hence the number can be easily manipulated by those not willing to take additional steps; 2. Providing an absolute number can create the impression of a "safe harbor" for inspections done by a manager with some lesser amount of financial dependence on the branch they are responsible. 3. The time period for review with respect the 20% requirement is not defined in the proposal. As such, an office may have "a good month" and then call into question whether such additional supervision is necessary. I suggest that the NASD drop the proposed 20% threshold and instead provide written guidance to members (perhaps in a separate Notice to Members or in the form of an article in the Regulatory and Compliance Alert) suggesting members take into consideration the dependence of managers on income generated from branch offices under their supervision when assessing the adequacy of their branch office inspection program and supervisory systems. I appreciate the opportunity to comment. Please let me know if you have any questions. Sincerely, Julie Gebert Vice President Director of Compliance Julie Gebert United Planners Financial Services of America Vice President Phone: 480-991-0225 ext. 214 Fax: 413-683-6918 jjgebert@unitedplanners.com Confidential Information: This message and any attachments contain information from United Planners Financial Services of America, which may be confidential and/or privileged, and is intended for use only by the addressee(s) named on this transmission. If you are not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by e-mail or by telephone and (ii) destroy all copies of this message.