From: John McClure [jmcclure@criadvantage.com] Sent: Monday, May 10, 2004 3:53 PM To: rule-comments@sec.gov Subject: File No. S7-11-04 May 10, 2004 John M. McClure President & CEO ProfitScore® Capital Management, Inc. 702 W. Idaho Street, Suite 1000 Boise, ID 83702 Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, NW. Washington, DC 20549-0609. Hello Mr. Katz: First, let me state that I think what happen with a few select firms was dead wrong and that these individuals should be thrown under the jail. They have tarnished an industry that attempts to do good work for the individual investor and thus the baby is being thrown out with the bath water. With that being said, I think the punitive redemption fees you are considering are blatantly wrong and should not be imposed. Why are you considering passing legislation that will impose higher fees onto the individual investor? The SEC is supposed to be the voice for the individual investor. The SEC has been one of the most important advocates for the small individual investor. A mandatory redemption fee is a complete reversal from its stated direction. Why would you even consider imposing an additional fee to individual investors that has no empirical study to document its benefit to the investor? Please answer these questions? 1.) Does the SEC have any studies that document that the mutual fund industry has an industry wide problem and that this problem passes on higher cost to individual investors? 2.) Does the SEC have any academic study that concludes that increasing redemption fees will benefit the individual investor? 3.) Why is the SEC rewarding an industry with higher fees and sticker assets who lost approximately 50% of retirement assets during the last bear market? 4.) Since you and I already know the answers to the above questions, does the ICI have the SEC on their payroll? My firm is a small registered investment advisory firm based in Boise Idaho. My firm does not practice market timing, as the press has described it, but we passionately believe and successfully employ investment strategies that sell depreciating assets and invest in appreciating assets. During the bear market, my client’s assets were mostly in cash or debt securities. My clients did not lose money during the bear market because the SEC has laws in place to allow me to properly allocate client assets according to market conditions. Why take that flexibility away from the individual investor by imposing punitive redemption fees? Do mutual funds not have the tools they need to eliminate NAV arbitrage? Stale pricing is the root of much of this problem. You and I both know that fair value pricing would eliminate more of this problem than an imposed redemption fee. Where will this redemption fee end? If you had your own mutual fund, you would be ringing your hands in excitement for the passing of this act. You will be given the green light to impose this fee for say 2 days, 2 weeks, 3 months, 6 months, one year, etc…… Where is the line drawn in the sand? Can the fee be higher than 2%? How far out can you go? Since every fund is required to impose this fee, you have removed the competition among mutual funds to keep their fees low and competitive. The net result is higher cost for mutual fund investors. In reading over what I just wrote, let me ask you again. Is the SEC on the payroll for the ICI? Respectfully, John M. McClure