MessageFrom: Steve McElravy [smcelravy@mail.bkst.com]
Sent: Wednesday, May 12, 2004 6:34 PM
To: rule-comments@sec.gov
Subject: File No. S7-11-04

I am opposed to the mandatory 2% redemption fee on any mutual fund withdrawals 
taking place within 5 days of a deposit.

I understand that the fee is meant to deter the paractice of international 
arbitrage, which takes advantage of stale prices, such as those occurring in 
international mutual funds. There are a number of problems, however, inherent in 
a government agency imposing upon investors what even one SEC commissioner calls 
a new "tax:"

1) Short-term trading is not illegal. Of the two culprits of the present-day 
mutual fund scandal, after hours trading is already illegal and the stale prices 
of international arbitrage lst only a maximum of 24 hours. Therefore a more 
prudent penalty period might be 2 days at the most but certainly not 5 days.

2) The SEC's estimated cost to all investors of simply administering the rule 
would top $1 billion per year (over $2 billion the first year). That's more than 
all the estimated damages caused by abusive trading. And that does not even 
count the redemption fees that will have to be paid by some.

3) International arbitrage can be resolved through fair value pricing.

4) Mutual Funds already have the ability to impose redemption fees of up to 2% 
for whatever time period they choose. If the fund does not feel short-term 
trading is adversely impacting shareholders, it should be up to the fund to set 
the policy, not a government aqgency.


Sincerely,

Steve McElravy
Financial Consultant
Brookstreet Securities
1215 Madrona Street
Monmouth, OR 97361