April 8, 1996

Ms. Deborah Masucci

NASD

33 Whitehall St.

New York, NY 10004

Dear Ms. Masucci,

I am in receipt of your March 25, 1996 letter and again state for the record that the NASD has never, nor now, identified the securities application issues it intends to submit to arbitrators. Therefore your reply is both superficial and sophomoric.

That is reinforced by the recent communiqué regarding a seminar including yourself and other luminaries. Everyone appears to be an attorney. So where are the people who understand securities application? While the level of knowledge necessary to conduct the legal aspects of an arbitration is exemplary, the grasp of WHY there is an arbitration or the issues underlying the disputes seems to be almost totally lacking.

Your last statement of March 25 says it all...."securities rules and practices are an important piece of the knowledge base for neutrals". Securities practices does not include an understanding of what brokers should be doing, only what they are doing. Securities knowledge and application is mandatory for arbitrators. Without a definitive position on diversification, step up in basis and the other items I have listed previously, arbitrators will continue to be unable to properly decide cases since neither they nor the attorneys will have a sufficient grasp of the fundamentals. Such is a disservice to the consumer. Try again.

Very Truly,

Errold F. Moody Jr.