April 6, 2004
To the SEC:
The American Association of Individual Investors AAII sent me notification about upcoming rules changes to aid purchasers of mutual funds and their close kin to more clearly identify operating and separate sales expenses.
Reviewing the suggested forms is confusing. Let me explain.
Utilizing the existing uniform requirements, mutual funds can be compared with how well an initial investment performs. It is easily understood, out of an intial 10,000 investment, 9,900 is invested, 100 goes someplace, whether for operating or sales costs and commissions. What is not easily understood are the managers cut, usually as a percentage of the principle amount managed, stocks, bonds, and cash. What is hidden are activities between mutual fund managers, public corporations, public media and less than arms length investors who have advantages over regular investors. These are investors that enjoy the after hours trading and better sales commissions and other percs.
Small investors like myself are being disenfranchised and we need your help, but we also need some statuary help as well regulatory help. Let me explain.
I worked for a company that manipulated the stock value by several means. Some were legal, shrinking labor costs by attrition, adjusting product prices up. Some werent ethical, not sure about the legality, changing pension plans from defined benefit to cash balance plans, saved heaps of cash outlays. Reducing inventory by selling lots of products to another company and having them returned sometime later, coinciding with abating manager conflicts with outside majority stock holder interests.
Along with an enfeebled pension, the company then changed the trustee of the 401Ks to Putnam. This was personally disheartening as funds in the previous trustees had track records, although most not publicly traded mutual funds, there was a history. We were offered selctions in Putnam funds that had no CUSIP and no history. Imagine my disgust when I heard about the recent irregularities discovered at Putnam and elsewhere.
There should be a law against privately held mutual funds in retirement plans. All funds should be public. Where is the regulatory oversight preventing sweetheart deals? What obliged my previous employer to change trusteeship from one financial company to another? Thats where help is needed. I cant compare Putnams performance, their funds offered to myself were born that year, mind you, there were some publically traded funds available. Performance cant be why trustees were changed, it smells like a dead woodchuck under the porch.
But I support any effort to point a ray of sunshine on contrivances, financial or otherwiase.