Subject: S7-09-00

Date:    06/26/2000 9:17 PM
     
     
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549-0609
     
Dear Mr. Katz:
     
    While I am in favor of presenting as much information about past returns 
to an investor as is meaningful, useful, and not misleading, I am concerned 
that the current proposal, S-7-09-00, by the SEC to show after-tax returns 
needs much further thought and development before it will achieve a 
beneficial effect.
     
    I have a concern that the presentation of the data showing after tax 
return will be used in ways totally unintended by the SEC. For instance, I 
think that the phrase after tax return will be confused by many of the general 
investing public.  It can easily be interpreted as the amount of the return 
that is reportable for taxes.  Since after tax returns will almost always be 
lower than before tax returns, it will have the effect of making some 
individuals think that a fund is doing much better than it is because it will 
appear that part of the return is tax-free, that there are extra dollars that 
are not part of an investor's filed tax return and are therefore after tax.  I 
believe that many mutual fund investors will be confused and believe this and 
that many brokers will not make an effort to correct this misunderstanding.
     
    My second concern is that fund management will change their methods of 
investing so as to minimize the effect of taxes on their funds' returns in 
the current and near term reporting periods by allowing huge tax effects to 
accumulate, e.g., by selling stocks bought at higher prices before selling 
shares bought at lower prices.  Over time, this will create a huge potential 
tax liability for future investors in the fund and have the effect of 
preventing a fund from selling any of its shares in excess of what it needs 
for redemption purposes.
     
    I do believe that investors need more information about their investments 
and tax effects, but the ultimate goal is to present the investor with 
meaningful decision making information.  I think the SEC needs to be careful 
of the effects on investment management of the funds that presentation of 
this data will have. The SEC needs to be extremely careful as to the many 
logical interpretations of the data that will occur by the general investing 
public that is not as close to the investing field and terminology as those 
at the SEC or as those who regularly work in the financial industry.
     
    Thank you for allowing me to comment.
     
Sincerely,
Milton Recht
Recht & Company
25 Dogwood Rd.
Mount Kisco, NY 10549