received

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IWNE'TY.NlWm

JOHN D. DINGFJ.LMICHIGAN, CHAIRMAN 2

J A M E SH, SCHEUER.NEW YON1( NIENRY A. WAXMAN. CALIFORNIA TIMOTHY E, W1RTH, COLORADO PHILIP R, SHARP, INDIANA JAMES J. FLORIO. NEW JERSEY EDWARD J. MARKET, MASSACHUSE'I'~rs THOMAS A. LUKEN. OHIO DOUG WALGREN. PENNSYLVANIA - BARBARA~ MIKULSKI. MARYLAND AL SWIFT. WASHINGTON M~KEY LSLAND, TEXAS II~CHARD C. SHELBY,ALABAMA CARDI$S COLLINS. ILLINOIS MIKE SYNA~ OKLAHOMA WJ. " B I L L r TAUZtN, LOUISIANA liON WYDEN, OREGON R~J.PH M. HALL TEXAS DENNIS F. SCKART.OHIO WAYNE DOWDy. MISSISSIPPI DILL RICHARDSON, NEW JIM SLATTERy. KANSAS GERRY SIKORSKI.MINNESO1A JOHN SRYANT.TEXAS JIM BATES, CALIFORNIA

NORMAN F. LEFTT.NEW Yore( EDWARD R MADIGAN, ILLINOIS CARLOS J. MOORHEAD, CALIFORNIA MATrHEIN J. RINALDO. NEW JERSEY WILLIAM E DANNEMEYEI~CALIFORNIA BOB WHITrAKEP~ KANSAS THOMAS J. TAUKE, IOWA DON RITTER. PENNSYLVANIA OAN COATS, INDIANA THOMAS J, BLILEY.JR. VIRGINIA JACK FIELDS.TEXAS MICHAEL G. 0XLEY, OHIO HOWARD C NIELSON. UTAH MICHAEL BILIRAJCIS.FLORIDA DAN SCHAEFER COLORADO FRED J. ECKERT.NEW YON& '[r]~NT LOTT. MISSISSIPIq

U.S. ~oute of gepreJentatiUee Committee on nerm,, anb Commerce ]loom 2125, larburn ~ouJe O(Ii,t ~uilbing

lUbin~on, ~C 20515 November

14, 1986

~fll~l, MICHAEL KrrzMILLIEI~ STAFF DIREC~rOR THOMAS M. RYAN.CHIE.FCOUNSEL

RECEIVED H o n o r a b l e John S. R. Shad Chairman Securities and Exchange Commission 450 Fifth Street, N. W. Washington, D. C. 20549 Dear

Chairman

NOV2419B6 .-~ - - . / . / ci .i

Shad:

This is with reference to your letter of August 28, 1986, t r a n s m i t t i n g a report prepared by the staff of the C o m m i s s i o n ' s D i v i s i o n of Market Regulation concerning a complaint against Shearson A m e r i c a n Express and related arbitration p r o c e e d i n g s c o n d u c t e d by the Chicago Board Options Exchange. I am enclosing a subsequent letter from the complainant, Joan Hunt Smith, and detailed response to the SEC staff report, and requesting that you clear up the omissions and inaccuracies p o i n t e d out by Ms. Smith. For example, the staff report states that "Smith appeared in that hearing, with counsel . ." when Ms. Smith advises that she did not appear at that hearin;. On what did the SEC staff base its statement? The SEC staff report does not comment on the fraud aspects, e.g., the illegally altered financial statements. W h y not? Please comment on them now. The staff requested that the NYSE investigate this matter. It has been over a year since that request (October 31, 1985); please inform the Committee of the NYSE findings. The staff report says that "the staff w o u l d not r e c o m m e n d that the Commission take any action against either the CBOE or Shearson ." How can such a r e c o m m e n d a t i o n be j u s t i f i e d in advance of'the results of the NYSE findings? What was the basis for the staff recommendation? _ Please provide the Committee with your response by the close of b u s i n e s s on Monday, December 29, 1986. That report should include an explanation of the extent of the i n v e s t i g a t i o n c o n d u c t e d by the staff.

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Honorable

November Page 2

John

14,

S.

R.

Shad

1986

Thank you for your attention to this request. ncerely,

/ CC:

CHAIRMAN

S u b c o m m i t t e e on Oversight and I n v e s t i g a t i o n s Ms. Joan Hunt Smith