March 1, 2004
What a mess
Please extend the comment period on SEC Rules 15c2-2 and 15c2-3 to at least 120 days. I recently printed this document to study so I could make intelligent comments, but there are over 100 pages and it simply will take a little time to absorb, seeing as I have to make a living at the same time.
I did notice the suggestion that 12b-1 fees be done away with. That makes no sense. Investors have very few people to turn to now who can get paid for answering their questions two, three or five years after they purchase a fund? No One, except the poor representative who sold it and all they receive in compensation now is a small portion of the 12b-1 fee. Take that away and the small consumer is really on their own. Does that make sense?
Sure large investors can get involved in wrap programs where adivsors who are properly licensed RIAs or banks can charge fees for their time, but most smaller investors will discover that the services provided to smaller accounts cannot justify the high fees and they will be left with load funds and 12b-1 fees. The 12b-1 fees are the only way to compensate representatives who are in a position to help these investors. Take that away and many reps. will simply stop answering the phone calls of smaller investors. Is that a worthy goal?
If the legislation is contemplating doing away with 12b-1 fees for disclosure reasons, then simply enforce the current disclosure rules. Representatives are already required to disclose them. Investors who have them properly disclosed and who agree to them should have no problems with them. 12b-1 fees are not inherently bad, they just need to be explained.
David R. Butts
Certified Financial Planner
Chartered Mutual Fund Counselor