# SECURITIES AND EXCHANGE COMMISSION

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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Acd41d21d7b512481

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

DIVISION OF
TRADING AND MARKETS

August 15, 2017

Victoria R. Westerhaus
Partner
Stinson Leonard Street LLP
1201 Walnut Street, Suite 2900
Kansas City, MO 64106
Re:

N.I.S. Financial Services. Inc. - Reliance on Exemption in Paragraph (k)(l) of
Rule 15c3-3

Dear Ms. Westerhaus:
This responds to your July 7, 2017 letter ("Letter") on behalf of N.I.S. Financial Services,
Inc. ("NIS"), in which you request written assurance that the staff of the Division of Trading and
Markets (the "Division") of the U.S. Securities and Exchange Commission ("Commission") ~.rill
not recommend enforcement action to the Commission under section 15(c) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rule 15c3-3 thereunder ("Rule 15c3-3") if NIS
relies on the exemption in paragraph (k)(l) of Rule 15c3-3 to conduct its business.
You have made the following representations with respect to your request. NIS is a
broker-dealer and a member of the Financial Industry Regulatory Authority ("FINRA"). NIS has
an affiliate called Ozark National Life Insurance Company ("Ozark National Life") and both
entities are wholly owned subsidiaries of CNS Corporation. Ozark National Life is a life
insurance company incorporated under the insurance laws of Missouri on April 22, 1964. CNS
Corporation formed NIS for the purpose of processing mutual fund investments, which are
ancillary to Ozark National Life's life insurance product offerings. Since 1969, Ozark National
Life and NIS have sold products called "Balanced Programs," which are the coordinated sale of
whole life insurance policies and mutual funds. Ozark National Life underwrites the life
insurance policies v..rhile NIS sells the mutual fund investments of an unaffiliated mutual fund
company (the "Mutual Fund"). The life insurance agents of Ozark National Life who sell the
Balanced Programs are also Series 6 registered representatives of NIS. Clients who purchase the
Balanced Programs are advised that they are buying a modified whole life insurance policy and,
after the first policy year, making periodic investments in the tv1utua1 Fund. Ozark National Life

Ms. Victoria Westerhaus
August 15, 2017
Page 2 of 4
and NIS have offered 25 different Balanced Programs at various times between 1969 and the

present.
You represent that since the inception of the Balanced Programs, NIS has never been the
direct recipient of customer funds. 1 Instead, clients make two separate payments when
establishing a Balanced Program: one payment to Ozark National Life for the life insurance and
another payment to the Mutual Fund to establish the mutual fund account. Unless the client
makes special arrangements, this is the only amount that will be invested in the first year. In
subsequent years, clients make single payments to Ozark National Life, and Ozark National Life
remits the mutual fund portion of the payment to the Mutual Fund. Payments occur either by
check or Automated Clearing House ("ACH") fund transfer with Ozark National Life listed as
the designated payee.
Rule 15c3-3 requires broker-dealers that carry customer accounts to maintain physical
possession or control over customers' fully paid and excess margin securities, and to maintain a
reserve of funds or qualified securities in an account at a bank that is at least equal in value to the
net cash owed to customers. Pursuant to paragraph (k)(l) of Rule 15c3-3, a broker-dealer
registered with the Commission is exempted from the requirements of that rule provided that the
broker-dealer, among other things, limits its activities to certain mutual fund or life insurance
products, promptly transmits all customer funds and securities, and doesn't otherwise hold funds
or securities owed to customers. The Commission has interpreted the term "promptly transmits"
to require that "transmission or delivery is made no later than noon of the next business day after
the receipt of such funds or securities" and has interpreted the term "receipt" to mean the time at
which a check or other negotiable instrument is first received by a registered representative of a
broker-dealer.2 Consequently, in order to rely on an exemption from Rule 15c3-3 pursuant to
paragraph (k) of the rule, a broker-dealer must forward checks by noon of the next business day

following a registered representative's receipt of such payment, unless the purpose for holding
such payment is to complete the broker-dealer's account opening process in compliance with
applicable regulatory requirements, such as FINRA's "Know Your Customer" and "Suitability"
rules. 3
You represent that NIS cannot directly accept funds from Balanced Program customers because insurance
regulations require that payments for whole life insurance be made directly to Ozark National Life.
Furthermore, Ozark National Life and NIS have considered the possibility of requiring customers to make
separate payments for the mutual fund investments and for the whole life insurance, but have decided that it
would be very costly, burdensome, and time-consuming for the large number of customers who pay small
monthly premiums. Moreover, such a change in procedure would be disruptive to NIS's business and
would create an excessive administrative burden for the broker-dealer.
See 17 CFR 240. l 5c3-l(c)(9) and FINRA, Interpretations of Financial and Operational Rules. Rule l5c3­
3(k)(2)(ii)/015, available at http://www.finra.org/sites/default/files/sea-ru!e-l 5c3-3-interpretations.pdf
(definition of ''promptly transmit").
See Order Granting a Conditional Exemption to Broker-Dealers From Requirements in Rules l 5c3-1 and
15c3-3 Under The Securities Exchange Act of 1934 To Promptly Transmit Customer Checks For The
Purchase of Deferred Variable Annuity Contracts, Exchange Act Release No. 56376 (Sept. 7, 2007): letter
issued to }-iYUFE Securities LLC, by Mark .M. Attar, Senior Special Counsel, Division of Trading and
Markets, Commission, dated },farch 12, 2015: letter issued to MML investors Services, LLC, MetLifr

Ms. Victoria Westerhaus
August 15, 2017
Page 3 of 4

You represent that Ozark National Life, acting as processing agent of customer funds on
behalf of NIS, historically has not promptly transmitted customer funds to the Mutual Fund in
three distinct scenarios:
1. If required by the Mutual Fund, until such time as the customer's funds reached
the minimum investment balance, which is cunently $100;
2. Because of the large volume of returned checks and ACH payments, until such
time as a customer's check or ACH payment had been cleared through normal
banking cycles by the appropriate financial institution; and
3. Instances in which mutual fund transactions could not be processed due to the
removal ofNIS as the broker-dealer on the given customer's mutual fund account.
Ozark National Life records customer funds not promptly transmitted as funds held in suspense
on its books. 4 If a mutual fund transaction cannot be processed due to the removal ofNIS as the
broker-dealer on the mutual fund account, Ozark National Life refunds the money to the
customer with an explanation of such refund.

In addition, NIS maintains a "Special Account for the Exclusive Benefit of Customers of
N.LS. Financial Services, Inc." (a "special reserve account") with a balance of at least $700,000
(an amount that historically has been approximately $200,000 in excess of any balance held in
suspense by Ozark National Life) for the protection of customer funds that are not promptly
transmitted. Moreover, NIS intends to continually monitor its special reserve account balance to
ensure it maintains in the account an amount of funds equal to the amount of funds held in
suspense by Ozark National Life at any given time, together with an additional safety margin of
approximately $200,000 in excess of such funds held in suspense.
Based on your representations, the Division will not recommend enforcement action to
the Commission if NIS relies on the exemption in paragraph (k)(l) of Rule 15c3-3 while Ozark
National Life, acting as processing agent of customer funds on behalf ofNIS, does not promptly
transmit customer funds in the three instances set forth in the Letter. This position is conditioned
on the following. First, NIS must disclose to its Balanced Program customers that their funds
may be held by Ozark National Life until such time as the customer has accumulated the
minimum investment balance, if any, required by the Mutual Fund and until such time as the
customer's check or ACH payment has been cleared through normal banking cycles by the

Securities, Tnc., and Thrivent Investment Management, Inc., by Michael A. Macchiaroli, Associate
Director, Division ofTrnding and Markets, Commission, dated July 19, 20 I 6.
You represent that the Mutual Fund has temporarily waived the minimum contribution requirement and, as
an interim solution, Ozark National Life no longer vvaits for customer checks and ACH payments to clear
before it transmits funds. Consequently, Ozark National Life transmits customer funds to the Mutual Fund
on a daily basis and does not currently hold any funds in suspense.

Ms. Victoria Westerhaus
August 15, 2017
Page 4 of 4
appropriate financial institution. Second, upon notification from the Mutual Fund that customer
funds cannot be processed because a customer has removed NIS as the broker-dealer on the
mutual fund account, Ozark National Life must return the funds to the customer no later than
noon of the following business day with an explanation of such refund. Third, the special
reserve account that NIS maintains for the protection of customers who purchase Balanced
Programs must only contain cash and must hold an amount of funds equal to the funds held in
suspense at Ozark National Life plus a safety margin of approximately $200,000 in excess of
such funds held in suspense.
You should understand that this is a staff position with respect to enforcement only, and
does not purport to state any legal conclusions on this matter. The Division's position is
confined to the facts and representations as stated herein. Any material change in circumstances
may warrant a different conclusion and should be brought immediately to the Division's
attention. This position may be withdrawn or modified if the Division determines that such
action is necessary for the protection of investors, in the public interest, or otherwise in
furtherance of the securities laws.

Sincerely,

Michael A. Macchiaroli
Associate Director
Division of Trading and Markets

Victoria R. Westerhaus
816.69 1.2427 DIRECT
816.412.9363 DIRECT FAX

STINSON
LEONARD
STREET

vicki.westerhaus@stinson.com

July 7, 2017

1934 Act, Rule l5c3-3

Via Electronic Mail

Division of Trading and Markets
Securities and Exchange Commission
l00 F Street, NE
Washington, D.C. 20549
Attention: Mr. Michael A Macchiaroli
Re:

N.I.S. Financial Services, Inc.

Ladies and Gentlemen:
On behalf of our client, N.I.S. Financial Services, Inc. ("NIS"), we hereby request a
determination by the Staff of the Division of Trading and Markets ("TM Staff") that it will not
recommend enforcement action to the Securities and Exchange Commission (the
"Commission") if NIS conducts its broker-dealer business in the manner described below in
reliance upon subparagraph (k) ( l) of Rule l 5c3-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for broker-dealers. NIS requests this interpretation of Rule
l 5c3-3 and the exemption thereto under the Exchange Act from the Commission in order to
allow NIS to continue, with minimal disruption, its current mode of business operations.
I.

Statement of Facts

Ozark National Life Insurance Company ("Ozark National Life") was incorporated on
April 22, 1964, and received a Certificate of Authority on June 24, 1964, as a life insurance
company under the insurance laws of Missouri. Ozark National Life is a wholly owned
subsidiary of CNS Corporation. Ozark National Life sells life insurance products in 29 states. It
currently has approximately 191,000 insurance policies in force. The types of policies include,
among others, term life, whole life and cancer. NIS is a member of FINRA and is a wholly
owned subsidiary of CNS Corporation and a sister company of Ozark National Life. CNS
Corporation formed NIS for the purpose of processing mutual fund investments, which are
ancillary to Ozark National Life's life insurance product offerings.
Since 1969, Ozark National Life and NIS have sold products called "Balanced
Programs." Balanced Programs are the coordinated sale of whole life insurance and mutual
funds (Ozark National Life underwrites the life insurance policies, while NIS sells the mutual
fund investments). The life insurance agents of Ozark National Life who sell the Balanced
Programs are also Series 6 registered representatives of NIS. Ozark National Life and NIS have
offered 25 different Balanced Programs at various times between 1969 and the present.
Currently, Ozark National Life and NIS offer two Balanced Programs: Plan 287 (offered since
2016) and Plan 297 (offered since 2016).

STINSON.COM

1201 WALNUT STREET • KANSAS CITY, MO 64106
816.842.8600 MAIN • 816.691.3495 FAX

Division of Trading and Markets
July 7,2017
Page 2

Clients who purchase the Balanced Programs are advised that they are buying a
modified whole life insurance policy and, after the first policy year, making periodic
investments in a mutual fund. During the first year, all of the payments are applied as life
insurance premiums. After the first year, Ozark National Life forwards an amount equal to
approximately one-half of the basic premium to an unaffiliated mutual fund company for
investment in the client's mutual fund account as the client pays premiums on the policy.
The average Balanced Program payment on policies currently sold is $1,033.62 annually. As
such, the average monthly mutual fund investment is approximately $43.03.
Since 1969, NIS has operated under an established business model in which NIS was
never the direct recipient of client funds. Instead, all payments were made either to Ozark
National Life or directly to an unaffiliated mutual fund company (the "Mutual Fund").
When establishing a "Balanced Program," clients write two checks: one to Ozark
National Life for the life insurance and a separate check to the Mutual Fund to establish their
mutual fund account. Unless the client makes special arrangements, this is the only amount
that will be invested the first year. In subsequent years, clients make single payments to
Ozark National Life, and Ozark National Life remits the mutual fund portion of the payment to
the Mutual Fund. The Mutual Fund, in turn, directly provides the client with confirmation of
each mutual fund purchase. Besides "Balanced Programs," clients may also add "extra fund
billing" to their life insurance policies, and the payments are handled in the same manner.
Ozark National Life currently has approximately 135,000 Balanced Program life insurance
policies in force. Each month there are between 100,000 and 120,000 transactions which
occur either by check or Automated Clearing House ("ACH") funds transfer with Ozark
National Life as the designated payee. The number of transactions varies considerably
depending upon which "mode" of payment the client selected (annual, semi-annual,
quarterly or monthly). Of these monthly payments, 11,000 to 13,000 are made by check and
85,000 to 108,000 are made by ACH funds transfer. However, if a client wishes to perform a
retirement account roll-over or any other type of mutual fund investment, such customer
writes a check or sends an ACH payment directly to the Mutual Fund.
To facilitate this arrangement, customers sign a Balanced Program Proposal form
which states, in relevant part:
I hereby authorize and instruct Ozark National Life Insurance, until further
written notice to the contrary, to act as my agent and to remit to [name of
Mutual Fund custodian and agent], custodian and transfer agent for [name of
Mutual Fund], any monies in excess of any insurance premiums due. These
excess funds are to be remitted for the purchase of mutual fund shares for my
account at the market price at the time of receipt by [name of Mutual Fund
custodian and agent].
The same authorization was formerly memorialized on a form titled Authorization Form
until December of 2011. The former Authorization Form also included the following disclosure:
I understand that [name of Mutual Fund custodian and agent] will not
accept monies for my mutual fund account in amounts less than $50.00.1 I
The Mutual fund's current minimum amount is now $100.
DB03/0761285.0006/10299086.9 CRO9

Division of Trading and Markets
July 7, 2017
Page 3

authorize Ozark National Life Insurance to hold in suspense any monies to be
remitted to [name of Mutual Fund custodian and agent] until such time as
these monies amount to at least $50.00.
Additionally, because of the large volume of returned checks and ACH payments
(approximately 400 to 500 per month), Ozark National Life began the practice of not
remitting funds to the Mutual Fund until actual receipt of those funds (i.e., checks and ACH
payments clearing at the bank). Lastly, instances occurred where mutual fund transactions
could not be processed due to the removal of NIS as the broker/dealer on the given
customer's mutual fund account and therefore the trade could not be completed. In each
of these three situations, no immediate mutual fund purchase could occur, and the
transaction was recorded as customer funds being held in suspense on the books of Ozark
National Life.
During the course of a 2006 examination by the NASD, the NASD examiner noted this
suspense account balance as a failure by NIS to record a $1,243,416 liability related to the
customer funds being held in the suspense account, thus resulting in an overstatement of the
firm's net worth.
As noted above, Ozark National Life has operated in the manner described above
since the inception of the Balanced Program in 1969. Our client has attempted to determine
whether NIS or Ozark National Life had ever sought any exemption or authorization from the
Commission for the arrangement embodied in the Authorization. Former NIS and Ozark
officers and employees have stated that they believed the Balanced Program was
operating under an interpretation given to NIS verbally by a Commission reviewer more than
48 years ago. Unfortunately, our client has been unable to locate the name of the
Commission reviewer or any other documentary evidence of the interpretation, possibly
because not all records for Ozark National Life were retained through the various changes in
ownership during the last 48 years.
The reasons NIS cannot directly accept Balanced Program customer checks include:
•
Balanced Programs are the coordinated sale of whole life insurance and
mutual funds (Ozark National Life underwrites the life insurance policies, while NIS sells
the mutual fund investments). Clients who purchase the Balanced Programs are
advised that they are buying a modified whole life insurance policy and, after the first
policy year, making periodic investments in a mutual fund. During the first year, all of
the payments are applied as life insurance premiums. After the first year, Ozark
National Life forwards any monies in excess of the insurance premiums (designed to
be an amount equal to approximately one-half of the basic premium to an
unaffiliated mutual fund company) for investment in the client's mutual fund account
as the client pays premiums on the policy. Insurance regulations require that the
payments be made to Ozark National Life, rather than to NIS.
•
Ozark National Life and NIS have considered the possibility of separate
payments to NIS and to Ozark National Life but don't believe that is feasible because
Ozark National Life and NIS have a very large number of customers who pay very
small monthly premiums. It would be very costly, burdensome and time-consuming for

DB03/0761285.0006/10299086.9 CRO9

Division of Trading and Markets
July 7, 2017
Page 4

customers buying the Balanced Program to require separate checks or ACH
payments to each of Ozark National Life and NIS. Such a procedure would be
disruptive to the business and would create a tremendous administrative
burden. From a business efficiency standpoint, it is not feasible to require separate
checks or ACH payments to each of Ozark National Life and NIS. It would create an
excessive burden on NIS' business and, more importantly, on its numerous clients if it
now had to ask clients to send a separate check or ACH payment each month to
each of Ozark National Life and NIS.

Interim Steps Taken
In 2006, in order to diminish concerns regarding monies being held in suspense by
Ozark National Life, based on advice from NASD (now FINRA) representatives, our client
made the following interim changes to address this issue while it seeks clarification from the
Commission regarding Rule 15c3-3 and the exemption thereto:
1. Mutual Fund's $50 Minimum Contribution Requirement. Regarding those monies
held by Ozark National Life because of the Mutual Fund's minimum $50 contribution
requirement, the Mutual Fund has granted our client's request to temporarily waive
the $50 minimum contribution requirement. As an interim solution, Ozark is sweeping
all mutual fund suspense accounts and sending the money on a daily basis to each
Mutual Fund. The Mutual Fund, however, does not want to continue to waive the
minimum contribution requirement because of the administrative costs and burden of
sending transaction confirmations for very small mutual fund purchases.
2. Suspense for Returned Checks and ACH Payments. Ozark National Life is no longer
waiting for checks or ACH payments to clear before transmitting funds to the Mutual
Fund. NIS has made arrangements whereby the Mutual Fund will not permit
immediate redemptions so that NIS will have an opportunity to verify that a check or
ACH payment has cleared before a customer can redeem his or her shares. Again,
this is an interim arrangement. The suspense account consistently reflects a negative
balance due to the approximately 400 to 500 returned items per month (or $1,000 to
$4,000 per day in returned items). Additionally, while NIS has the ability to reverse
these returned item transactions with the Mutual Fund, NIS bears the market risk during
the time period from when the funds are invested until the transaction is reversed.
3. Suspense for Non-NIS Accounts. Ozark National Life is, and plans to continue,
promptly refunding, directly to the customer, all funds which are designated for
accounts which are not in good order (i.e., where no mutual fund account yet exists
or where a competing broker/dealer has taken over the account). Because NIS loses
all ability to monitor activity when another broker/dealer has taken over the account,
it is not appropriate to contribute to the fund account. Accordingly, because NIS is
obligated to refuse the trade, the money is promptly refunded to the customer with an
explanation of such refund.

DB03/0761285.0006/10299086.9 CRO9

Division of Trading and Markets
July 7, 2017
Page 5

4. Formation of (k)(2)(i) Account. In addition to the above actions, NIS currently
maintains a "Special Account for the Exclusive Benefit of Customers of N.I.S. Financial
Services, Inc." (a "(k)(2)(i) account") in accordance with Rule 15c3-3 of the Exchange
Act. NIS placed $700,000 in the (k)(2)(i) account for the protection of customers who
purchase Balanced Programs, which NIS deemed in good faith to be more than
adequate to cover any "intra-day" accumulation which might occur between the
daily sweeps of Ozark National Life's accounts to the Mutual Fund. Ozark National Life
does not transfer customer funds into the (k)(2)(i) account and instead promptly wires
such funds directly to the Mutual Fund.
Discussion and Analysis
Based upon the facts set forth above and on various interpretive letters with respect to
the term "promptly transmit" as defined in Rule 15c3-3, it is our opinion that NIS should be
able to operate pursuant to subparagraph (k)(1) of Rule 15c3-3 if NIS conducts its business
subject to the following conditions: (1) Ozark National Life, acting as a processing agent for
NIS, would collect and promptly transmit customer funds to the Mutual Fund (with the
exception of three distinct scenarios, as discussed below); (2) NIS would maintain its (k)(2)(i)
account and continually monitor its (k)(2)(i) account balance to ensure it maintains the
amount of funds held in suspense by Ozark National Life at any given time, together with an
additional safety margin of approximately $200,000 in excess of such funds held in suspense;
and (3) NIS would be responsible for the following securities-related activities: opening
accounts, imaging and processing orders and setting up and maintaining customer files.
Discussion of "Promptly Transmit"
In general, the term "promptly transmit" as used in paragraph (k) of Rule 15c3-3 has
interpreted
to require a broker-dealer to transmit customers' property by noon of the
been
next business day after receipt or by noon of the next business day after settlement day,
whichever is later. See Midwest Stock Exchange no-action letter dated July 14, 1975.
However, NIS desires to permit Ozark to temporarily hold money in suspense for three
purposes: (1) until clearance of a customer's check or ACH payment; (2) if required by the
Mutual Funds, until the customer accumulates the current $100 minimum investment
balance; or (3) instances in which mutual fund transactions cannot be processed due to the
removal of NIS as the broker/dealer on the given customer's mutual fund account, at which
time the money would be promptly refunded to the customer with an explanation of such
refund.
The Commission has recognized the validity of holding a customer's property until such
time as the customer's check has cleared through normal banking cycles. See National
Bank of North America no-action letter dated June 1, 1977 (the Commission agreed that it
would raise no question if a broker-dealer operating pursuant to subparagraph (k)(2)(i) of
Rule 15c3-3 held, or had its agent hold, customer's fully-paid negotiable securities until such
time as the customer's check received in payment for such security has cleared, provided
that the customer is notified that such securities will be delivered upon the clearance of the
check received in payment). NIS would like Ozark National Life to continue to hold customer

DB03/0761285.0006/10299086.9 C109

Division of Trading and Markets
July 7, 2017
Page 6

funds until the customer's check or ACH payment has cleared. In accordance with the
National Bank of North America no-action letter, we believe NIS and Ozark National Life can
hold a customer's check until it has cleared, so long as the customer is notified that his or her
check or ACH payment will be held until it has cleared through normal banking cycles. With
respect to future clients buying the Balanced Program, NIS would expand the Authorization
described above to state that the customer's check or ACH payment will be held until such
funds have cleared through normal banking cycles and then will be transferred to the Mutual
Funds to purchase the mutual fund portion of the customer's Balanced Program, subject to
the minimum investment requirement discussed below.
Second, Ozark National Life would hold customer funds until a customer accumulates
the current $100 minimum investment amount. We believe this is a novel issue which, to our
knowledge, has not been addressed by the SEC. However, because any minimum
investment amount would be outside the control of NIS and because the money would be
held in Ozark National Life's account (which will be protected by a balance of at least
$700,000 in the NIS (k)(2)(i) account, an amount that historically has been approximately
$200,000 in excess of any balance held by Ozark National Life), we believe that the benefits
to investors outweigh the potential risks if Ozark National Life is allowed to hold customer
funds for the purpose of accumulating the $100 minimum investment contribution, so long as
customers are notified that such funds will be held until the minimum contribution
requirement is accumulated, as reflected in a form of Authorization substantially similar to the
one set forth above. NIS will continually monitor its (k)(2)(i) account balance and will ensure
that it always has sufficient funds to cover the amount being held by Ozark National Life, and
will also include in the (k)(2)(i) account a balance of approximately $200,000 in addition to
the amount being held in suspense by Ozark National Life at any given time.
Responsibilities of NIS
As a registered broker-dealer, NIS is responsible for the following securities-related
activities: opening accounts, recording and processing customer orders and setting up and
maintaining customer files. Customer funds that are sent to Ozark National Life, as processing
agent for NIS, simultaneously are entered on the blotters of NIS. As a result, as soon as money
is received by Ozark National Life, it can be traced to the appropriate client though the NIS
system.
Because NIS is a subscription firm, however, it does not enter customer orders, clear
transactions, carry customer accounts, distribute order confirmations after each payment is
posted or distribute quarterly statements to customers. Instead, the Mutual Fund handles all
such functions, including distributing order confirmations after it posts each customer
payment and distributing quarterly statements to customers. NIS has an immediate record of
such confirmations and statements through the Mutual Fund's Vision system, and every
broker dealer and registered representative receive electronic copies on an annual basis.
NIS currently discloses and will continue to disclose to its customers that NIS, and not
Ozark National Life, is offering the Mutual Funds, and that the customer's intended
investment amount is not covered by the Securities Investor Protection Corporation while it is
in the possession of Ozark National Life.

DB03/0761285.0006/10299086.9 CRO9

Division of Trading and Markets
July 7,2017
Page 7

III.

Request for No-Action Relief

We believe the interests of the approximately 135,000 Balanced Program customers of
Ozark National Life and NIS would be best served by a favorable consideration of the
requests contained in this letter. Based upon the foregoing facts and analysis, we
respectfully request that the TM Staff advise us that it will not recommend to the Commission
that any enforcement action be taken if NIS conducts its broker-dealer business in the
manner described above in reliance upon the exemption under subparagraph (k)(1) of Rule
15c3-3 of the Exchange Act for broker-dealers.
Please do not hesitate to contact me at 816-691-2427 or vicki.westerhaus@stinson.com
with any comments, questions or requests for additional information regarding the foregoing.
In addition, if the TM Staff believes it may not agree with the conclusions expressed in this
letter, we request the opportunity to confer with them prior to a written response to this letter.
Please acknowledge receipt of this letter on the enclosed copy hereof and return the same
to the undersigned in the enclosed self-addressed,stamped envelope.
Best regards,
STINSON LEONARD STREET LLP

Victoria R. Westerhaus
VRW/pm
cc:

N.I.S. Financial Services, Inc.

DB03/0761285.0006/10299086.9 CRO9

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Acd41d21d7b512481. Public record. Not legal advice.