From: Ken and Bonnie Clevenger [kbclevenger@hotmail.com] Sent: Friday, January 23, 2004 1:15 PM To: rule-comments@sec.gov Subject: "New Confirmation and Point of Sale Disclosure Requirements" 23 January 2004 Mr. Jonathan G. Katz Secretary, SEC 450 Fifth Street, NW Washington, D.C. 20549 Via e-mail: rule-comments@sec.gov In re: New Confirmation and Point of Sale Disclosure Requirements Dear Mr. Katz: I am a middle aged, professional, long term Federal government employee who has spent most of a 28 year career saving for retirement to supplement my expected retirement benefits and ultimate social security benefits. I have, what is to me, a very substantial amount of critical savings and investment resources in mutual funds. The recent news revelations about the financial industry's favored insider investment benefit activity (both to brokers and privileged, wealthy customers) that seems to strike directly at the pocket of the average routine investor/thrifty saver must be corrected. I look to the SEC for that action. The SEC's recently proposed new guidelines for confirmation and point of sale disclosures is a small step in the right direction. A code of ethics, as proposed, would not hurt, but be sure that it is also widely published to the buying public so we can know whether, what we think is being done, is a violation. And also insure that there is a clear and easy place to report suspected violations by the public and a meaningful enforcement mechanism to inhibit violators. More independent board of directors members is also a proper approach but be sure also to limit the total number of places on similar boards any one person can fill to a very few such positions. Also insure that "independent" does not exclude any ownership interest. In fact, a minor level (even up to several hundreds of thousands of dollars) of ownership interest is exactly what is best for most board members. A stake in the activity is good but not so large as to justify/rationalize a compromise of independent judgment or curry support of or a wink at questionable financial machinations. Obviously it is the "professional" traders (sellers) of the funds who have mainly corrupted the process for their own benefit in commissions or other fees. Their disclosures should be made not only to individual customers but somehow "posted" on a publicly accessible site so that other potential customers or auditors could compare and evaluate the nature of their disclosures. I am not sure I see how the second disclosure at the confirmation point of the sale would be a benefit. It seems too late then to help the buyer. But what is strictly necessary it to keep the lawyers away from the exact language of the required disclosures. It must be expressed in plain English for common understanding even at the expense of a little exactitude. Suffice it to say that the loss of exactitude should be on the side of saying a conflict is extant or greater rather than minor or non-extant. Comparative fund cost and fee data is also a valuable thing but be sure it is an "apples to apples" comparison Finally, look carefully at how 12b-1 fees are allowed in your regulatory process. If the consumer is not getting anything individually for the fees, they should not be authorized. Likewise, if the fund (as an investor's corporate entity; and not "the fund" as the employees and managers of that entity or its contracted management/administration entity ) is not getting any direct economic benefit from the fees, they should not be authorized. Our public savings protections must be safeguarded and preserved if you expect future earners to learn to save and present generation investors to remain committed to the financial market. That is a key role for the SEC. I will raise one other point to suggest an expansion of the SEC's vital oversight and investigatory role. Every one of these funds which has engaged in "dubious" practices has, in addition to responsible, or culpable, senior managers and directors and executive officers, a corporate General Counsel and likely staff lawyers. I am a lawyer myself, so this is not merely mindless anti-lawyer rhetoric, but surely those attorney's took a bar admission oath that pledged them, at the cost of their law license, to standards higher than their client's mere pecuniary interests. In Florida we had to swear that we would "employ for the purposes of maintaining the causes confided to [us] such mean on ly as are consistent with truth and honor... ." It is a dirty job but someone has to be responsible for telling the rapacious corporate business leaders that some things, done in the name of profit, are just wrong and not to be done. I think you should think about going after some of the General Counsels for their derelictions or active support of obvious violations. Sincerely, Kenneth H. Clevenger 5019 10th Street, North Arlington, VA 22205 -------------------------------------------------------------------------------- Add photos to your messages with MSN 8. Get 2 months FREE*.