From: Lyons, Chris (DALLAS EY 586) [chris_lyons@ml.com] Sent: Tuesday, May 11, 2004 9:02 AM To: 'rule-comments@sec.gov' Subject: File No. S7-11-04. A few of my thoughts on the proposed redemption fee rule . The proposed rule is really ridiculous. · There is no study that indicates that there is an industry wide problem of abusive mutual fund trading that passes higher costs onto buy and hold investors. · There is no academic study that concludes that a mandatory redemption fee will eliminate abusive trading of mutual funds. · Therefore there is no logic in making the 90% of funds who do not now have redemption fees, most likely because they have concluded they have no abusive trading problem, impose redemption fees. · Imposing a mandatory redemption fee is equivalent to instituting a tax on mutual fund investors. · The SEC has for 30 years led the way in lowering the costs of investing for investors and it would be a radical reversal in policy should the SEC vote to impose a mandatory redemption fee. · Should the SEC impose a mandatory redemption fee, it will be the beginning of a trend that will take redemption fees out to 6 to 12 months in a relatively short period of time. This is also due to the fact that there is little competitive pressure in the mutual fund market place to encourage keeping the fees on for only a few days. · A great deal of short term trading of mutual funds is due to stale pricing of fund shares. To this end, fair value pricing is much more effective in quashing short term trading of funds than a redemption fee ever will be. · Funds have all the tools they need to control abusive trading of their fund shares. They need only use them to be effective. The solution is not mandatory redemption fees. Christopher J. Lyons CFM Wealth Management Advisor Merrill Lynch 13355 Noel Rd Seventh Floor Dallas TX. 75240 972-980-8677 800-999-6692 972-386-1317 Fax http://fc.ml.com/CHRIS_LYONS _______________________________________ CAUTION: electronic mail sent through the internet is not secure and could be intercepted by a third party. For your protection, avoid sending identifying information, such as account, Social Security, or card numbers to us or others. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically.