From: Ben Buckner [benbuckner@charter.net]
Sent: Friday, December 12, 2003 7:42 AM
To: rule-comments@sec.gov
Cc: Chuck Coutellier; Bryant Caveness
Subject: S7-26-03:

I have read the recent proposal.  It is a giant step in the right direction, 
for requiring fund companies to disclose their frequent trading rules.  However, 
I object to some wording in one paragraph.  You suggest the following:
 
For example, a fund might state that a 2% redemption fee will be applied to all 
redemptions within 60 days after purchase or, in describing any restrictions on 
the volume or number of purchases, redemptions, or exchanges that a shareholder 
may make within a given time period, a fund might state that it prohibits more 
than 3 exchanges per year.
 
I feel that the 2% redemption fee and the 60 day period are both excessive. The 
companies already charge a lot of fees, perhaps even another 1% redemption fee 
for shares held less than 1 year.  You are giving them permission to add more 
fees, with a fairly high probablity they will collect on them.  A 60-day period 
is simply not within any reasonable definition of "frequent". This fee, and the 
60-day period are not in the best interest of people who simply trade occasionally, 
for reasons such as portfolio rebalancing, IRA redemptions, observing changes in 
trends, opening of new or previously closed funds, acquiring new knowledge of 
better funds, emergency situations, and becoming annoyed with a company's policies.  
Such reasons are not "timing" and can often be reasons for trading in less than 
60 days. This suggestion clearly favors the fund companies, not the share holders 
who know nothing about "timing".
 
Although you might argue that this is a suggestion only, I am afraid, once placed 
in writing this way, fund companies will immediately adopt it, feeling the SEC 
endorses and encourages such a fee and they will have no further problems in this 
area.  It may soon become "cast in concrete" and eagerly adopted by fund companies 
as a rule to benefit them (beyond the need), which has been promulgated by the SEC.
 
Secondly, the last statement is reasonable, if applied to exchanges in and out of 
one fund.  If it means 3 exchanges per year among all of a company's funds, this 
is an unreasonable rule.  This should be clarified and apply to a single fund, not 
all funds in a company.
 
My suggestions in wording are:
 
For example, a fund might state that a 0.75% redemption fee will be applied to all 
redemptions within 10 days after purchase or, in describing any restrictions on the 
volume or number of purchases, redemptions, or exchanges that a shareholder may make 
within a given time period, a fund might state that it prohibits more than 4 exchanges 
per year in and out of any fund.
 
This will discourage what most of us deem as rapid or excessive trading, otherwise 
called market timing, which is apparently mostly done within time periods of only 
a day or two, or a few days.  Your suggested fee is simply too high, and 60 days 
goes far beyond the need to discourage rapid trading among mutual funds.  Limiting 
exchanges to 4 per year, for each fund, would be more appropriate and in line with 
what Fidelity and other companies apply.
 
Ben Buckner, Ph.D
benbuckner@charter.net