December 26, 1996
     
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450  Fifth Street NW,  Stop 6-9
Washington, DC   20549
     
by e-mail to:  rule-comments@sec.gov
     
Ref:  File #S7-27-96
     
     
Dear Mr. Katz:
     
Regarding the SEC's proposed amendments to the broker/dealer books and 
records rules, we wish  to make several comments.
     
1)  Regarding accessibility of detailed blotters and memoranda "with 
respect to the activities of each local office," we would hope this 
could be satisfied through the broker/dealer's capacity to produce from 
its Home Office detailed blotter(s) for a given associated person or 
group of associated persons on a timely basis as requested.  Otherwise, 
smaller independent contractor firms like ours will face a rather 
unattractive choice:  a) constantly maintain and produce hundreds of 
reports which would appear to have little added business value (or wed 
already be producing them), or;  b) introduce significant additional 
on-line automation costs and capabilities for RRs.  Yet this provision 
would appear to achieve only the most incremental, occasional added 
convenience for examiners.
     
2)  Regarding additional records on associated persons, while we believe 
most, if not all, of our RRs maintain comparable files at their places 
of business, we believe the more appropriate, and much more manageable, 
approach is for the broker/dealer to maintain the "official" files on 
associated persons and be able to produce them on a timely basis. 
Requiring the same files in each RR's locality serves little discernible 
purpose other than to run up copying costs.
     
3)  Regarding updating requirements for customer account forms, we are 
unclear.  Special NASD Notice to Members 96-80 states that "proposed 
Rule 17a-3(a)(16) includes a one-year updating requirement with respect 
to the investment objectives'."  However, the rule itself says, 
"investment objectives '. shall be designated upon opening a new account 
and updated, if required, on an annual basis thereafter."  We would 
strongly argue against any uniform time requirement for updating.  Our 
firm has sustained the policy that such updates are required at the 
point an investor is entering into a new investment if there has been a 
material change in the customer's suitability profile or the information 
on file is more than three years old, or any time we consider it 
necessary.  In other words, our policy requires updating when it 
matters.  Imposing an arbitrary, annual-updating requirement without 
regard to actual changes in circumstance or incidence of investment 
activity is just a mandate for thousands of hours of virtually 
meaningless busy work plus significant paper and mailing costs.
     
4)  Regarding the stipulation that each account form carry a percentage 
limit relating to "speculative" investments, our limited experience with 
"suitability" complaints suggests that such a stipulation is quite 
useless without a very clear, practicable definition of "speculative," 
and that trying to craft such a definition is a fool's errand.  For all 
practical purposes, any investment on which a disgruntled customer loses 
money will generally be claimed to have been too "speculative."  And 
even if a customer indicates "speculation" as a primary investment 
objective, the RR and broker/dealer still must know the customer and 
make recommendations appropriate to his or her overall circumstances.
     
5)  Regarding the requirement that each account form carry information 
on the customer's level of education and number of dependents, these 
would seem to be of dubious added value for basic determination of 
suitability.  The RR and the firm always have the opportunity - indeed, 
the obligation - to seek further relevant information when a given 
investment recommendation raises suitability concerns.  Cluttering up 
all account forms with all the information that might be useful in a few 
special situations seems pointless and counter-productive.
     
As an overall perspective, we might point out that many brokers have 
already opted for the relatively unregulated approach of operating as 
independent registered investment advisors, pursuing a securities 
investment business through discount brokerage firms, no-load mutual 
fund families, etc. Layering additional paperwork and record keeping 
requirements on broker/dealers and their RRs simply feeds this trend. 
In other words, by mandating with ever-increasing specificity how 
broker/dealers meet their supervisory obligations, the states and the 
SEC are likely to find themselves directly supervising an ever-rising 
tide of individual, "unaffiliated" RIAs. 
     
In closing, we would simply ask if there is any real reason to believe 
that the proposed changes will improve  substantive compliance or 
investor protection?  Has lax or insufficient record keeping really been 
the problem, or are we simply reordering the industry for the 
convenience of examiners and auditors?
     
Sincerely,
     
Mark Hamby, (ext. 202)
President & CEO