Subject: File No. S7-06-04
From: Mark A. Malinski
April 7, 2005
To Whom It May Concern:
It has come to my attention that brokerage firms are being paid by mutual fund companies to push their mutual funds, rather than the mutual funds of companies which have not made such payments. (I understand that, in the industry, this is called revenue sharing; in radio they called it “payola.”) I rely on professional advice when making my investment decisions. However, I am appalled at learning of this practice.
I have always trusted those professionals who have provided me with investment advice – and paid them to provide me with this service. How can you allow this to continue? Unsuspecting investors like me could be hurt very badly by these types of unethical practices. I am relying on others’ advice for my retirement savings – I do not want my savings to be in jeopardy.
The SEC and NASD should forbid brokers from requesting and/or accepting these types of payments. Meanwhile, you should require brokers to disclose such conflicts of interest upfront to their clients before providing any other information. While it is important to me to know how much I pay for advice, it is even more important to me to know that somebody may not necessarily be acting on my behalf. Independence and transparency are critical; we demand it of auditors to protect investors, we should also demand it of those who are handling the investor’s money.
Mark A. Malinski