Swiss American Securities Inc. and Streetline, Inc.: No

Swiss American Securities Inc. and Streetline, Inc.: No-Action Letter dated May 28, 2002

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May 28, 2002

Mark Dorsey

Fried, Frank, Harris, Shriver & Jacobson

1001

Pennsylvania Avenue, NW, Suite 800

Washington, DC 20004-2505

Re: Swiss American Securities, Inc. and Streetline, Inc.

Dear Mr. Dorsey:

In your letter dated May 28, 2002, on behalf of Swiss American

Securities, Inc. ("SASI"), you have asked for assurances that the staff of

the Division of Market Regulation ("Division") will not recommend

enforcement action to the Securities and Exchange Commission

("Commission") under Section 15(a) of the Securities Exchange Act of 1934

("Exchange Act") if SASI or its affiliate Streetline, Inc. ("Streetline")

engage in certain Internet-related activities without Streetline

registering as a broker-dealer in accordance with Section 15(b) of the

Exchange Act.

We understand the facts to be as follows: SASI is a registered U.S.

broker-dealer that does much of its business with foreign financial

institutions. SASI seeks to market Internet-based financial services to

those foreign financial institutions, and to enter into agreements with

the foreign financial institutions by which SASI would make website

services available to the foreign financial institutions. In return, the

foreign financial institutions would agree to route all orders for U.S.

securities placed by their customers through the websites to SASI for

execution. The foreign financial institutions would route all orders for

non-U.S. securities in accordance with the foreign financial institutions'

internal procedures, or to other entities as designated by the foreign

financial institutions. The foreign financial institutions would use the

websites to offer financial services to their customers, but the foreign

financial institutions would not provide access to any customer who is a

U.S. resident unless the foreign financial institution is registered as a

broker-dealer with the Commission. In all events, the foreign financial

institutions that are not registered as broker-dealers with the Commission

would be required to represent that they have implemented policies "to

prevent the triggering of U.S. broker-dealer registration requirements in

connection with the use of the web site."

SASI would contract with Streetline to develop, customize and host the

websites. The website services that would be made available to the foreign

financial institutions could include order entry capability for the

foreign financial institutions' customers, and capabilities for

determining account information, conducting research and receiving alerts,

as well as other services. Each foreign financial institution would

determine which capabilities to include on its particular web site.

SASI would pay Streetline an initial fee to develop and customize each

foreign financial institution's website, along with a regular periodic fee

to maintain and host the website (directly or through a third party). SASI

also would pay Streetline a per-order messaging fee - presently expected

to be $1 per order - to establish and maintain the linkages that

communicate orders to SASI.

SASI would charge the foreign financial institutions a commission for

executing orders, plus website development and maintenance fees that would

be based on the development and maintenance fees that SASI pays

Streetline.

Although the foreign financial institutions would route all orders for

U.S. securities that are placed on the websites to SASI, the websites

would not identify either Streetline or SASI. Furthermore, as you state in

your letter, "Streetline would play a passive role with respect to the

securities activities of the foreign financial institution and its

customers." Also, "Streetline will not take part in the financial services

offered by the foreign financial institution (other than providing

software and providing or arranging for maintenance of the website)

including the opening, maintenance, administration or closing of brokerage

accounts, or the solicitation of trades." In addition, Streetline would

not provide assistance in resolving problems, discrepancies or disputes

involving brokerage accounts or related securities transactions, and would

not answer questions or engage in negotiations involving brokerage

accounts or related securities transactions. Moreover, Streetline would

not recommend or endorse specific securities to the foreign financial

institutions' customers, and the foreign financial institutions' customers

would not be able to contact Streetline through the site.

SASI would exercise control over Streetline in developing and

maintaining the websites, and SASI would assume full responsibility for

the operation of the websites and for Streetline's compliance with

applicable federal securities laws. SASI would treat the foreign financial

institutions as its customers with respect to all aspects of the websites

(except to the extent that the foreign financial institutions are excluded

from the definition of "customer" by the federal securities laws or

self-regulatory organization rules), including any work done by

Streetline. SASI would be responsible for all marketing related to the

agreements and for negotiating the agreements with the foreign financial

institutions, and Streetline would not engage in any marketing or

negotiate the agreements. SASI would be the contracting party with the

foreign financial institutions for the agreements, while Streetline would

not be a party to those agreements. SASI would have the right to terminate

its contracts with Streetline. Streetline would not exercise any

discretion over the websites, and Streetline's participation in developing

and maintaining the websites would be limited to providing software and

systems technology and maintaining the proper technical functioning and

hosting of the websites. Streetline would not hold the foreign financial

institutions' customers' funds or securities, be involved in the clearance

and settlement of securities transactions, or extend credit or arrange for

the extension of credit to any customer. See Prescient Markets,

Inc. (publicly available April 2, 2001).

In addition, SASI's election to use Streetline would not relieve SASI

of its responsibilities under the federal securities laws, including any

applicable standards regarding order handling capacity. With regard to

consumer financial information related to the Agreements, Streetline would

be governed by all financial privacy obligations applicable to SASI under

Title V of the Gramm-Leach-Bliley Act and under the Fair Credit Reporting

Act (in addition to any similar obligations that may be directly

applicable to Streetline). Moreover, for purposes of examination at any

time or from time to time during business hours by the Commission, its

designees, or representatives, any self-regulatory organization of which

SASI is a member, or any state securities regulator having jurisdiction

over SASI, all facilities, technology, and books and records of Streetline

shall be the facilities, technology and books and records of SASI.

Response of the Division of Market Regulation

On the basis of the facts presented and your representations, the

Division will not recommend enforcement action to the Commission under

Section 15(a) of the Exchange Act if SASI and Streetline engage in the

activities discussed in your letter without Streetline registering with

the Commission as a broker-dealer. In taking this position, the Division

notes that the proposed arrangements contain safeguards that should

prevent Streetline from being in a position where it could solicit

securities transactions, directly or indirectly.

SASI, a registered broker-dealer, will be solely responsible for

marketing the Internet services, negotiating with the foreign financial

institutions, and entering into contracts with the foreign financial

institutions. The foreign financial institutions will pay only SASI for

the Internet-based financial services. Streetline will have no role in

marketing the services or negotiating agreements. Streetline will not be a

party to any agreements with the foreign financial institutions, and SASI

will be able to replace Streetline. Also, the websites will make no

mention of Streetline or SASI.

Although Streetline will perform limited, non-discretionary functions

in configuring and maintaining financial service websites for the foreign

financial institutions, Streetline will perform that work only in its

capacity as a contractor for SASI. SASI will be responsible for all the

work that Streetline performs. Streetline's activities will be highly

circumscribed, in that Streetline would not exercise any discretion over

the websites, and its participation would be limited to providing software

and systems technology and maintaining proper technical functioning and

website hosting. Streetline will not open, maintain, administer or close

brokerage accounts, or provide assistance in resolving problems,

discrepancies or disputes related to brokerage accounts.

In essence, Streetline should be invisible to the ultimate users of the

websites and will be restricted to operating on behalf of SASI when

performing technical functions.

To date, the Division has issued only one letter granting no-action

relief for an Internet-related service that would be paid per-order fees

without registering as a broker-dealer. In the Division's letter regarding

Charles Schwab & Co. (November 27, 1996), the Division granted

no-action relief to broad-based Internet service providers that would not

specifically direct their operations toward the securities industry, and

that would take a passive role toward the interaction between brokerages

and their customers, other than routing messages. Those Internet service

providers could receive a nominal flat fee for each order transmitted. The

proposed activities of SASI and Streetline go beyond the activities

contemplated by the Schwab letter - Streetline would not provide

broad-based services, but instead would direct its activities toward the

securities industry; Streetline would not passively link customers with

broker-dealers, but instead would help provide order-handling services;

and Streetline's $1 per-order compensation is more than "nominal."

The Division nonetheless believes that under these circumstances,

Streetline may receive per-order fees without registering as a

broker-dealer because of the many safeguards that should prevent

Streetline from being in a position where it could solicit transactions in

securities. In other words, this no-action relief would not apply if:

Streetline participated in marketing the services or in negotiating the

agreements between SASI and the foreign financial institutions; Streetline

was a party to the contracts between SASI and the foreign financial

institutions; Streetline exercised discretion over the websites;

Streetline's name or brand name appeared anywhere on those websites; or

SASI failed to exercise control over Streetline's development and

maintenance of the websites.

The Division also notes that because of Streetline's defined role,

Streetline will not be in a position to engage in broker-dealer

activities. For example, Streetline will not hold itself out as a

broker-dealer, provide information or advice related to securities

transactions to the customers of the foreign financial institutions, match

orders, make decisions about routing orders, facilitate the clearance and

settlement of executed trades, prepare or send transaction confirmations,

screen counterparties for creditworthiness, or hold funds or securities.

The positions expressed above are based solely on the facts presented

and the representations made to the Division in your letter, and any

different facts or conditions may require a different response.

Furthermore, this response only expresses the Division's position on

enforcement action and does not purport to express any legal conclusions

on the questions presented.

This letter addresses only the registration status of Streetline, and

no other issues. For example, this letter does not address the question of

what are SASI's obligations under the securities laws arising from SASI's

assistance with the operation of the websites of the foreign financial

institutions. This letter also does not address status of the foreign

financial institutions under the federal securities laws.

Sincerely,

Catherine McGuire

Chief Counsel

Incoming Letter

May 28, 2002

202-639-7173

Securities Exchange Act of 1934

Section

15

VIA FEDERAL EXPRESS

Catherine McGuire, Esq.

Chief Counsel and Associate Director

Division of Market Regulation

U.S. Securities and Exchange

Commission

450 Fifth Street, N.W.

Washington D.C. 20549

Re: Streetline, Inc.

Dear Ms. McGuire:

This letter requests that the staff of the Securities and Exchange

Commission (the "Staff") advise our client, Swiss American Securities Inc.

("SASI"), a registered broker-dealer, that the Staff will not recommend

any enforcement action under Section 15(a) of the Securities Exchange Act

of 1934 ("Exchange Act") against SASI or its affiliate, Streetline, Inc.

("Streetline"), if SASI and Streetline engage in the activities described

below and Streetline does not register as a broker-dealer under Section

15(b) of the Exchange Act.

SASI is a registered broker-dealer and a member of the National

Association of Securities Dealers, Inc., and a member organization of the

New York Stock Exchange, Inc. and various regional U.S. securities

exchanges. Streetline is wholly-owned by SASI's parent company. A

significant portion of the business conducted by SASI involves SASI's

execution of trades in U.S. securities for foreign financial institutions

that place orders with SASI, both for their own account and for the

accounts of the foreign financial institutions' customers. 1 SASI has historically serviced these orders and

communicated them to the market place by telephone, facsimile, the Society

for Worldwide Interbank Financial Telecommunications ("SWIFT") or other

electronic communication systems operated by third party vendors such as

Automatic Data Processing, Inc. ("ADP") and Reuters "InterTrade Direct".

SASI pays a per order message fee for utilizing the communication devices

of SWIFT, ADP, and InterTrade Direct to communicate orders between SASI

and its customers as well as between SASI and market centers.

In order to maintain the competitiveness of the securities brokerage

services it provides to its foreign financial institution clients and to

enable those clients to more efficiently handle orders from their

customers, SASI intends to offer foreign financial institutions the

ability to provide their customers with the significant price and

convenience advantages that are associated with accessing an Internet site

to place orders for securities transactions. Internet communication

represents the most widely accessible electronic medium for transmitting

securities orders and as a result, SASI anticipates that it will be the

medium of choice in the next millennium. In connection therewith, SASI

proposes to enter into order flow agreements with its foreign financial

institution clients pursuant to which SASI will make web site services

available to the foreign financial institution through its affiliate,

Streetline, and the foreign financial institution will agree to direct all

on-line orders for U.S. securities to SASI for execution.

SASI's web site development and hosting services will be marketed by

SASI and offered to foreign financial institutions that enter into an

order flow agreement with SASI (the "Agreement"). Pursuant to the

Agreement, the foreign financial institution will route all orders for

U.S. securities that are placed by the foreign financial institution's

customers through the web site to SASI for execution, and the foreign

financial institution will route all orders for non-U.S. securities that

are placed by the foreign financial institution's customers through the

web site in accordance with its internal procedures for non-U.S.

securities, or to another entity as designated by the foreign financial

institution (including possibly an affiliate of SASI) for execution.

Orders routed to SASI will be executed in an omnibus account maintained by

SASI in the name of the foreign financial institution. Each foreign

financial institution will be required to represent in the Agreement that

it will comply with all laws, rules and regulations applicable to it in

connection with the Agreement in each jurisdiction in which it offers the

web services, including any disclosure obligation(s) regarding its order

flow arrangement with SASI.

Pursuant to the Agreement, the foreign financial institution will pay

to SASI an up-front fee to cover the start up expenses associated with the

development and customization of the foreign financial institution's web

site and a monthly maintenance fee for the maintenance and hosting of the

site. The amount of these two fees will be based on the amount that

Streetline charges to SASI for the development, maintenance and hosting of

the web site. SASI will also charge the foreign financial institution a

commission for executing orders that are placed through the web site and

routed to SASI for execution.

SASI, in turn, will contract with its affiliate, Streetline, to provide

the actual web site development, maintenance and hosting services.

Streetline, using software available in the market, will develop and

customize web sites for the foreign financial institution that will allow

the foreign financial institution to offer various services to its

customers through the Internet. Streetline also will provide hosting

services for the foreign financial institution's web site either directly

or through a third party, which may or may not be affiliated with

Streetline. Pursuant to the terms of the contract between SASI and

Streetline, SASI will pay Streetline an up-front fee for the development

and customization of the foreign financial institution's web site and a

regular periodic maintenance fee for the maintenance and hosting of the

site. In addition, SASI will pay Streetline a fee for establishing and

maintaining a communications linkage in order to allow orders placed

through the web site to be electronically transmitted to SASI for

execution. This messaging fee will be the same type of fee that SASI

currently pays to third party vendors to electronically transmit orders

between SASI and its customers and between SASI and U.S. market centers -

a flat per order messaging fee for each order communicated to SASI through

the linkage, regardless of the size of the order or whether the order

results in an executed trade. 2

The proposed web sites to be developed by Streetline will have the

following possible capabilities or functions:

A Customized Home Page - This page will identify the foreign

financial institution, its products and services.

FAQS and Customer Tutorials - This function will address fundamental

questions regarding on-line trading, and provide an on-line interactive

demonstration to educate the customer on the use of the Internet trading

function.

Market Data - The site will make available quotes, news and other

market data with respect to U.S. and foreign securities, which will be

obtained from third party vendors.

Research - The site will be capable of making available to customers

research reports, if any, prepared by the foreign financial institution,

as well as research prepared by third parties, including SASI.

Alert/Monitoring - This capability will allow a user to input various

criteria (e.g., price movement, news release) for a limited number of

securities and receive notification by e-mail, pager or voice if and

when the selected criteria are triggered.

Order Execution and Status - This capability will allow a foreign

financial institution's customer to place orders for securities for

their account at the respective institution and to monitor the status of

their orders (e.g., open, filled, canceled).

Account Information - This function will allow a foreign financial

institution's customer to access information regarding his or her

account at the institution (e.g., cash and securities positions).

Customer Service Functions - This function will allow the foreign

financial institutions to better communicate with their customers by

e-mail, bulletin boards and on-line seminars. 3

A foreign financial institution's web site may include all, or only

some, of the capabilities or functions described above. The capabilities

or functions actually included on each web site will be determined by the

foreign financial institution in its sole discretion and the foreign

financial institution will be responsible for the accuracy of all

materials that appear on the web site. Neither Streetline nor SASI will be

identified on the web site. Streetline will not handle any of the foreign

financial institutions' customer's securities or funds and Streetline will

not extend credit or arrange for the extension of credit to any such

customer.

Streetline will play a passive role with respect to the securities

activities of the foreign financial institution and its customers.

Streetline will not take part in the financial services offered by the

foreign financial institution (other than by providing the software for

the web site and providing or arranging for maintenance and hosting of the

web site) including the opening, maintenance, administration or closing of

brokerage accounts, or the solicitation of trades. Nor will Streetline

provide assistance in resolving problems, discrepancies or disputes

involving brokerage accounts or related securities transactions.

Streetline will not answer questions or engage in negotiations involving

brokerage accounts or related securities transactions and Streetline will

not recommend or endorse specific securities to the foreign financial

institution's customers. In addition, customers of the foreign financial

institution will not be able to contact Streetline through the site.

At least initially, SASI expects that no foreign financial institution

will make its site available to the general public. Rather, the site will

be password protected, and will only be available to customers of the

foreign financial institution who have been provided with a password by

the institution. Pursuant to the terms of the Agreement, unless registered

as a broker-dealer with the SEC, the foreign financial institution will

not provide access (i.e., will not provide a password) to any customer who

is a U.S. resident. In all events, foreign financial institutions that are

not U.S. registered broker-dealers will be required to represent to SASI

that they have implemented policies and procedures that reasonably could

be expected to prevent the triggering of U.S. broker-dealer registration

requirements in connection with the use of the web site.

We believe that the anticipated operations of Streetline follow the

principles set out in prior no-action letters (e.g., Quick America

Corporation (pub. avail. June 28, 1993); Evare, LLC (pub. avail. November

30, 1998); Charles Schwab & Co., Inc. (pub. avail. November 27,

1996)). In that regard, Streetline: (i) will not hold or have access to

any foreign financial institution's customer's funds or securities; (ii)

will not recommend or endorse specific securities to such customers; (iii)

will not become involved with the financial services provided by the

foreign financial institution to its customers (other than through the web

site software and hosting services). Although Streetline will conduct the

ministerial task of programming the foreign financial institution's web

site to route orders for U.S. securities to SASI for execution, and, if

directed to do so by the foreign financial institution, will program the

web site to route orders for non-U.S. securities to an entity other than

the foreign financial institution (including possibly an affiliate of

Streetline), such programming will not reflect an order routing decision

or recommendation of Streetline. Rather, it will reflect the foreign

financial institution's decision about where to route its order flow.

We also believe that the anticipated operations of Streetline follow

the principles set out in Prescient Markets, Inc. (pub. avail. April 2,

2001). In that regard: (i) SASI will exercise control over

Streetline's development and maintenance of the sites; (ii) SASI will

assume full responsibility for the operation of the sites, including,

among other things, Streetline's compliance with applicable federal

securities laws; (iii) SASI will treat the foreign financial

institutions as its customers with respect to all aspects of the

sites, 4 including any work by Streetline;

(iv) SASI will be responsible for all marketing related to the

Agreements and for negotiating the terms of the Agreements - Streetline

will not engage in any marketing related to the Agreements nor will it

negotiate the terms of the Agreements; (v) SASI will contract with

the foreign financial institutions - Streetline will not be a party to the

Agreements and SASI will have the right to terminate its contracts with

Streetline; (vi) Streetline will not exercise any discretion over the

sites - Streetline's participation in developing and maintaining the sites

will be limited to providing software and systems technology, and

maintaining the proper technical functioning and hosting of the sites;

(vii) Streetline will not be involved in the clearance and settlement

of transactions; (viii) electing to use Streetline will not relieve

SASI of its responsibilities under the federal securities laws, the rules

thereunder or any other applicable legal requirements, including any

applicable standards regarding order handling capacity.

With regard to consumer financial information related to the

Agreements, Streetline will be governed by all financial privacy

obligations applicable to SASI under Title V of the Gramm - Leach - Bliley

Act and under the Fair Credit Reporting Act (in addition to any similar

obligations that may be directly applicable to Streetline). Finally, for

purposes of examinations at any time or from time to time during business

hours by the Securities and Exchange Commission, its designees or

representatives, any self regulatory organization of which SASI is a

member, or any state securities regulator having jurisdiction over SASI,

all facilities, technology, and books and records of Streetline shall be

the facilities, technology, and books and records of SASI.

* * *

If you have any comments or questions relating to this request, or wish

to discuss this matter further, please contact the undersigned at (202)

639-7173.

Sincerely,

Mark Dorsey

________________________

1

Such orders are executed in an omnibus account maintained by

SASI in the name of the foreign financial institution.

2

In this regard, Streetline presently expects to charge $1 per

order.

3

Other web site capabilities or functions may be offered to

foreign financial institutions at a later date, such as the ability

to pay on-line for security purchases. If this capability is added,

Streetline will not have custody of the funds or securities of the

customers of any foreign financial institution.

4

To the extent the federal securities laws and rules of self

regulatory organizations exclude the foreign financial institutions

from the definition of "customer", the foreign financial

institutions will continue to be excluded from those

definitions.

http://www.sec.gov/divisions/marketreg/mr-noaction/swissamer052802.htm

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Modified:

02/10/2005