Subject: File No. S7-08-04
From: James E Grant, CPA

April 14, 2004

Dear Sir/Madam

I am author of How to Select and Use Mutual Funds published by CCH, Inc., and I frequently speak and write on mutual fund investing issues. I will be making comments about a number of SEC proposals to regulate the mutual fund industry. This particular comment is in regards to the proposed SEC rule to increase record-keeping and disclosure requirements by a funds Board of Directors and to also increase a Boards independence.

Mutual funds were a great investment concept when they began to appear in greater numbers in the 1970s. They are now a plight and burden to investors. Their fees are excessive, and their high turnover is now understood as often resulting from hedge fund and market timing activity. Because capitalism frequently works to weed out the least efficient and unprofitable, mutual funds will be largely replaced by exchange-traded funds as the more viable investment option. Most investors, however, still havent discovered ETFs.

When I speak to groups of CPAs, I frequently advise them to ignore most mutual funds. The cost to acquire other investments have now declined to the point where investors with modest-sized portfolios can form their own fund with little problem and probably with better results. Better investment research and investment tools are also now available to small investors. All these factors make most mutual funds superfluous.

If mutual funds are to survive, and if investors are going to cave into their high fees, the credibility of the industry must be restored. The provisions of Sarbanes-Oxley didnt apply to the mutual fund industry, for reasons which I never understood, and it is imperative that the SEC proposed rule changes be implemented. That is, I agree wholeheartedly with all your proposals.

Respectfully,

James E. Grant, CPA