March 24, 2004
Ladies and Gentlemen:
Thank you very much for the opportunity that you have afforded me, an individual investor, to comment upon your proposed rules and forms. I wish to share a simple view of the issue from the standpoint of an individual investor.
The Commission must not play softball, but continue demanding disclosure of overcompensation paid largely by unwary amateurs who are vulnerable to the professionals in the Financial Community. Fees extracted from individual investors by avaricious compensation committees, mutual fund fee-setters and commission houses must be disclosed as you plan.
It is essential that such disclosure be accompanied by a tutorial, written by your staff or the Founder of Vanguard, that can help set the investor free from arbitrary and capricious pricing practices that would never be tolerated in any other business. In other words, do not just highlight the trip wire, show that there are safe, readily available alternatives. Buyers should be informed, before purchase, that the product under consideration is, or may be, similar to no-load products that can be purchased readily on the open market directly from the fund organization. You can find a list of such finds at state source.
I highly applaud the explicit language relative to loads that you show in your forms. The investor should receive this information before the purchase is formalized. If the firm wishes, I would not object to non-threatening language along the lines of: We believe that our services benefit investors and are well worth the compensation that we will receive.
Press on with best wishes,
Harry Letaw, Jr., Ph.D.