March 1, 2004
I think that it is a serious error to rush into these kinds of changes. Investors will be better served by having any changes considered more thoroughly. This document is too long and involved, and the consequences too unclear for it to be rushed through. At the very least, the period for comment should be lengthened considerably. We have seen too many times when additional regulations end up becoming a burden to those they are intended to help.
Investors already get very confused by all of the required regulatory language and paper work. They are also losing money because THEY are the ones who have to pay more each year for the regulatory requirements.
I think the elimation of 12b-1 fees is a mistake. These fees are all disclosed already. Further they provide a vital means of having the broker receive continuing payment to make it possible to provide service to the client. Often in the past there have been complaints about brokers churning accounts with a lot of buying and selling to generate commissions. Service fees can help eliminate that and get better service -- and better investing results -- for the investor.
What matters for investors is integrity, good service, and good performance. The bottom line, i. e., performance NET of fees, is already provided to investors. Too much of the rest just confuses clients.
It may be that additional rules are needed, but I think it would be prudent to consider these measures more fully. As it is, the market has taken drastic action to correct any abuses in the mutual fund marketplace. Lets see how that works and think these things through before adding more regulation and more cost to the investor.