May 7, 2002

By Facsimile, Mail and Electronically

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 6-9
Washington, D.C. 20549

Re: Commission File Nos. SR-NASD-2002-21 and SR-NYSE-2002-09

Dear Mr. Katz:

This letter follows up on the comments we recently submitted on behalf of First Call and the Investment Management Group of Thomson Financial Inc. ("Thomson Financial") regarding the above-referenced proposals which the National Association of Securities Dealers, Inc. through its wholly owned subsidiary, NASD Regulation, Inc. and the New York Stock Exchange, Inc. (collectively, the "SROs") have made to address research analyst conflicts of interest.

We understand that the Commission has received more than 50 public comments on these very important proposals. While the commenters uniformly applauded the regulators' efforts to protect the investing public from the untoward consequences of analyst conflicts, almost all commenters also identified substantial, practical issues that must be resolved in order for the rules to operate fairly and effectively. In particular, more than a dozen commenters, including First Call, pointed out that the proposed definition of "research report" is so broad that it would effectively eliminate broker-dealers' ability to distribute many types of valuable research to clients. A number of commenters also identified technical problems with the rules, including the fact that they seem to require the impossible feat of including graphical presentations in text-only reports.

Although each of the SROs has filed an amendment to its proposals1 these amendments do not address most of the concerns voiced by the commenters, particularly the scope of the definition of "research report" and the technological issues. We understand that because of the very short amount of time provided between the close of the public comment period and the Commission's announced public meeting to consider these rules, the SROs have had no choice but to leave to futurewritten interpretations both the critical definition of "research report" and a host of the other practical issues the commenters have raised.2

We respectfully submit that the Commission cannot properly evaluate and approve SRO rules whose applicability depends on the definition of a critical term, without a clear understanding of what that definition is.3 Nor can rules that impose technical requirements be approved unless the Commission is satisfied that those requirements are capable of being met. Deferring these issues entirely to post-adoption SRO interpretations does not comply with the letter or the spirit of Section 19(b)(1) of the Securities Exchange Act of 1934.4

Therefore, we respectfully urge that the Commission not adopt the proposed rules at its May 8, 2002 open meeting, but rather that it provide the SROs with the necessary time to redraft the rules to address the open issues. We further ask that the rules so revised be republished for comment.

We very much appreciate the opportunity to express these views.

Very truly yours,

Mari-Anne Pisarri

cc: Hon. Harvey Pitt
Hon. Isaac C. Hunt, Jr.
Hon. Cynthia A. Glassman

1 Amendment No. 1 to SR-NYSE-2002-09, dated April 29, 2002; SR-NASD-2002-21, Amendment No. 2, dated May 1, 2002.
2 Letter from Philip A. Shaikun, Assistant General Counsel, NASDR, to James A. Brigagliano, Assistant Director, SEC Division of Market Regulation, dated May 2, 2002; Letter from Darla C. Stuckey, NYSE Corporate Secretary to James A. Brigagliano, dated May 2, 2002.
3 See Timpinaro v. SEC, 2 F.3d 453, 1993 U.S. App. LEXIS 20530 at **20 - **23 (D.C. Cir. 1993)(remanding SEC approval of NASD "Professional Trader Rule" where court determined that five of seven factors set forth in the rule were ". . . subject to seemingly open-ended interpretation").
4 See Senate Committee Report No. 94-75 at 29-30 (1975).