From: Barbara Moore [bmoore@KeystoneAdvisors.Net] Sent: Friday, February 06, 2004 5:45 PM To: rule-comments@sec.gov Subject: File Nos. S7-27-03 and S7-26-03 Keystone Capital Management, Inc. P.O. Box 1829 Gulfport, MS 39502 228-868-7309 February 6, 2004 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 RE: FILE. NO. S7-27-03 and FILE NO. S7-26-03 Dear Mr. Katz: I am the founder and CEO of an investment advisory firm in Gulfport, Mississippi. We manage approximately $105,000,000 of investor assets utilizing mutual funds, variable annuity sub-accounts, and variable life sub-accounts. Our client base is "Mom and Pop Investor"-we will accept $5,000 accounts. Keystone's mission is to actually help the little guy on Main Street. I am concerned about the resulting effect of the proposed rules on the welfare of Mom and Pop Investor, and my comments follow. Hard 4:00 PM Close: Our clients have absolutely zero dollars custodied directly at mutual funds themselves. Instead, 100% of their assets are custodied at brokerage firms, trust companies, or life insurance companies. These intermediaries, with a hard 4:00 PM close rule implemented, would have to push back their trading cutoff time several hours (to say 1:00 PM) so they could process the trades and forward them to the fund company by 4:00 PM. This seems unfair to Keystone investors by denying them end-of-day pricing, and the related access to news events for three hours. In fact this proposed Hard 4:00 PM Close Rule would actually FORMALIZE AND INSTITIONALIZE the unfair advantage illegal after hours "late trading" has. HOW IRONIC! Because most large investors (like hedge funds) trade directly at the mutual funds at 4:00, they would have an advantage over small Mom and Pop Investors trading through intermediaries by denying them access to late-breaking news between 1:00 and 4:00 PM. This unintended consequence is the irony of ironies! Please DO NOT implement this rule. The problem to my mind, is not ineffective existing rules, but rather a lack of documentation, compliance and enforcement of them. In the alternative, a system with an unalterable "time stamp" would go a long way toward an effective "modified-hard-close" that is enforceable and would not hurt anybody. Mutual Funds Specifying Trading Policies: At last, with the implementation of this proposed rule, there is hope for reason and order at these fund companies. Heretofore it has been a "mental free-for-all" dealing with the fund companies. Keystone has spent the last three or four years "walking on the eggshells" of these fund companies. It usually begins with ambiguous prospectus language or Third Party Investment Advisor department policies. From there it usually escalates to the arbitrary, swift, and unilateral change of the policy at the whim of the fund company. It is disruptive to Keystone and in turn to our Mom and Pop Investor client base when these policies are "arbitrarily" changed. Where is the level playing field? Where is the rule of "law"? For example, on December 30, 2003, we received a letter stating "The Destructive Trading Policy" from an insurance company intermediary custodian dated December 23, 2003, again restating their trading policy. On January 20, 2004, Keystone received a letter, as did all Keystone's investors at the custodian, that we had violated "The Disruptive Trading Policy" and Keystone and our investors were placed on a "watch list." This alarmed not only Keystone, but many of our elderly, retired Mom and Pop Investors as well because they received the same letter. Upon investigation, the claim for "violation" was a trade for 1.22% of everyone's account which occurred on December 12, 2003. This was 11 days before the letter was dated and 18 days before we received the letter about the new trading rules! This is nuts. Unfortunately, this is also typical. How can Keystone run a business dealing with an industry that behaves so poorly? How can we actually help Mom and Pop Investor attain their financial goals, like security during their retirement years, while standing on this shifting sand. Enough said. Please DO NOT implement the Hard 4:00 PM Close. Please DO implement the requirement for explicit statement and administration of trading policies. Very truly yours, KEYSTONE CAPITAL MANAGEMENT, INC. Charlton Jones Chief Executive Officer CRJ/bem cjones@keystoneadvisors.net The information contained in this communication is intended only for the personal and confidential use of the designated recipients to which it is addressed. This communication may contain information that is privileged, confidential or otherwise protected from disclosure. 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