From: Jannea [jannea@swbell.net] Sent: Thursday, April 29, 2004 12:26 PM To: RULE-COMMENTS@SEC.GOV Subject: Fw: Mutual Fund Redemption Fees (type a) ----- Original Message ----- From: Victoria Ragland To: emivlr@swbell.net Sent: Thursday, April 29, 2004 11:23 AM Subject: Mutual Fund Redemption Fees Jonathan G. Katz Secretary , SEC File No. S&-11-04 Dear Mr. Katz: In reference to the proposed mandatory 2% redemption fee on any withdrawals taking place with 5 days of a mutual fund deposit, our firm opposes this for the following reasons: 1) The estimated cost to all investors of administering the rule would top $1 billion per year (over 2 billion the first year). That's more than all the extimated damages caused by abusive trading. That does not count the redemption fees that will be paid by some. 2) International arbitrage can be resolved through fair value pricing. 3) A redemption fee is a very unfair weapon. It does not discriminate between active trading and genuine need. Investors who have a need for their monies will end up paying for a solution designed to punish abusive trading. 4) The SEC does not have any independent studies of the cost of redemptions from domestic equity and bond funds. 5) Redemption fees discourage investors from limiting risk in their portfolios. In a study of the S & P over the past ten years, there have been 404 occurrences where an investor waiting five days to avoid a 2% redemption penalty would have experienced a greater than 2% loss, 46 occurrences would have resulted in losses from 5% to 10% while five of these instances would have resulted in a loss of greater than 10%. 6) 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 agency. In summary, the 2% redemption fee has the potential to do far more harm to investors than it will help. Sincerely, Victoria L. Ragland, President ------------------------------------------------------------------------------ Get rid of annoying pop-up ads with the new MSN Toolbar - FREE!