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Judith G. Belash, Esq., Goldman, Sachs & Co.

June 14, 1999

Judith G. Belash, Esq.
Vice President/Associate General Counsel
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004

Re: Exemption Request - NASD Conduct Rule Section 2720(l)

Dear Ms. Belash:

This letter responds to your June 9, 1999 letter and Request for Exemption on behalf of Goldman Sachs & Co. ("Goldman"). You request an exemption from the requirements of Paragraph (l) of NASD Conduct Rule 2720. That provision requires a member to obtain "prior specific written approval" from a customer with a discretionary account before selling the customer a security in an offering covered by Rule 2720. You limited your Request for Exemption to offerings of straight debt securities, structured notes, and straight preferred stock issued by Goldman or affiliated entities of Goldman (together, "Goldman entities"). A copy of your letter and the Request for Exemption are attached hereto and made a part of this letter.

Goldman has proposed an "advanced authorization" procedure in lieu of the requirement in Rule 2720 for "prior specific written approval" by customers with discretionary accounts. The procedure would require an advanced written letter of consent by certain customers who invest in straight debt, straight preferred, and structured note offerings by Goldman entities and oral authorization by the customer prior to execution of the transaction In addition, Goldman would be required to maintain a central file tracking historically the actual use of the authorization by customer accounts (in addition to retaining copies of each letter of authorization in each customer’s file). Goldman proposed that customers who are eligible for the advanced authorization procedure be limited to those with accounts under management at Goldman that have at least $2 million in a single account or a set of family-related accounts.

The Corporate Financing Department ("Department") has reviewed the advance authorization procedure set forth in the Request for Exemption. We believe that the procedure addresses the purpose of Paragraph (l) of Rule 2720, which is to ensure that members do not place securities covered by Rule 2720 in customers’ accounts without the prior approval of such customers. The Department believes that the advanced authorization procedure is appropriate for offerings of non-convertible fixed income securities, including preferred stock, but not equity investments, where the customer meets a test of having at least $2 million in a single account or a set of family-related accounts. Moreover, the advance authorization procedure proposed by Goldman does not relieve it from compliance with the specific suitability standards of Rule 2720(k) that requires a member selling a security covered by Rule 2720 to have reasonable grounds to believe that the security is suitable for each customer.

Finally, we understand that Goldman will continue to obtain the prior specific written approval from customers required by Rule 2720(l) in the case of : (1) discretionary accounts that do not meet the $2 million threshold; and (2) sales to any Goldman customer of any equity security, convertible debt, or convertible preferred stock of Goldman entities.

Based upon the representations made in your June 9, 1999 letter and Request for Exemption submitted on behalf of Goldman, the Department agrees to grant an exemption from Rule 2720(l) pursuant to the Rule 9600 Series. Any changes to those representations may result in a change in this position. Also, please be advised that the Department intends to publish advice to the membership regarding the availability of an exemption from Rule 2720(l) on the same terms as granted herein.

Very truly yours,

Joseph E. Price, Director
Corporate Financing Department