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<FONT
face=Arial color=black size=2><SPAN
>This
is an appeal to all SAAFTI members to comment to the SEC on the proposed 2%
Mandatory Redemption Fees and to copy their comments to their Senators and House
Representatives. An Excel file is attached with phone and fax numbers of all
Senate and House legislators. Use area code 202 with these numbers. Send a copy
of your comments to SAAFTI as well at saafti@xxxxxxxxxxxxxxx The
<SPAN
>deadline for SEC
comments is May 10<SPAN
>, but please do not
wait until the last minute.<FONT face=Arial
color=black>The information below
provides a summary of the rule and comment process. Do take the time
to read the rule on the SEC site at <A
href="">http://www.sec.gov/rules/proposed/ic-26375a.htm.
You will find it very readable and as you review the proposal, you will
understand the reasoning of the SEC with respect to the rule, as well as
specific issues the Commission is requesting comment on.
<SPAN
>SAAFTI opposes
mandatory redemption fees for the following reasons:<FONT
face=Arial color=navy>
<SPAN
>
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Mandatory redemption fees, if
imposed, will detrimentally impact millions of mutual fund investors who
periodically reallocate their accounts as well as many retirees who receive
periodic distributions from their retirement accounts. It is not these people
who are the abusive traders of mutual funds.
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Mandatory redemption fees penalize
investors for managing risk in their mutual fund accounts. In a study of
the S&P 500 over the past 10 years, there have been 404 occurrences where
an investor waiting five days to avoid a 2% redemption penalty would have
experienced a greater than 2% loss. 46 occurrences would have resulted
in losses from 5 to 10% while 5 of these instances would have resulted in a
loss of greater than 10%. (this data has been posted to SAAFTINet and <A
href="">www.saafti.com ).
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Mandatory redemption fees will
limit the ability of Registered Investment Advisors to manage client accounts
effectively depriving investors of professional assistance. Periodic changes
in fund positions for rebalancing or changing asset allocations would have to
be made on an account by account basis to avoid incurring a redemption fee in
instances where the investors may have added or withdrawn funds recently. This
will be prohibitively time consuming and costly for advisors to administer.
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Most experts agree that better
solutions to curb abusive short term trading are fair value pricing and
clearly stated policies on purchase and redemption policies that are uniformly
enforced.
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Mandatory fees should NOT be
imposed by funds that do not have a problem with abusive trading. The
SEC's proposal amounts to price fixing. Funds should have the discretion to
decide whether or not investors should be penalized to remedy a problem that
may not exist.
<LI class=MsoNormal
><FONT
face=Arial color=navy size=2><SPAN
>Any redemption fees,
especially mandatory fees, should only be used to recoup actual costs incurred
by the fund by abusive traders. Data referred to by the SEC in
accounting for the costs of abusive trading on a portfolio were over a decade
old. <SPAN
>
<FONT face=Arial color=black
size=2><SPAN
><SPAN
>Rule Summary: The Securities and
Exchange Commission is proposing a new rule under the Investment Company Act
that would require mutual funds (with certain limited exceptions) to impose a
two percent redemption fee on the redemption of shares purchased within the
previous five days. The redemption fee would be retained by the fund. The rule
is designed to require short-term shareholders to reimburse the mutual fund for
costs incurred when they use the fund to implement short-term trading
strategies, such as market timing.Comments must be received on or before
May 10, 2004.Submission
Process: Comments should be sent by one method only. Comments in
paper format should be submitted in triplicate to Jonathan G. Katz, Secretary,
Securities and Exchange Commission, <st1:Street
w:st="on">450 Fifth Street, NW, <st1:City
w:st="on">Washington, DC
20549-0609.
<SPAN
>Comments in
electronic format should be submitted to the following E-mail address: <A
href="">rule-comments@xxxxxxx.
<SPAN
>All comment letters should refer to
File No. S7-11-04; if E-mail is used, this file number should be included on the
subject line.
<FONT face=Tahoma color=black
size=2><SPAN
><FONT
face="Arial Narrow" color=black><SPAN
>Susan
TruesdaleSAAFTI Administrator<st1:address
w:st="on">6732 W. Coal Mine Ave., #446<st1:place
w:st="on">Littleton, <st1:State
w:st="on">CO <st1:PostalCode
w:st="on">80123Phone: 888-261-0787Fax:
303-979-2192saafti@xxxxxxxxxxxxxx<A href=""
eudora="autourl">www.saafti.com<FONT face=Arial
color=black>
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