March 1, 2004
I am providing my comments on your proposed Rules 15c2-2 and 15c2-3. I would appreciate an exstension of time to 120 days to provide a more thorough review of the proposals.
I received my Series 7 license in 1983, and subsequently received my Series 24. I earned my Certified Financial Planner designation in 1985.
Whereas I am all for full disclosure, and making sure the prospective client understands the costs and fee structure of any investment, I fail to understand the necessity of the client to know what portion of the commission goes to my broker/dealer and what portion comes to me.
It is clear to me from the recent breakpoint surveys done by the SEC and the NASD, that some of the major investment houses do not provide the same level of disclosure as most of us who are CFPs. My clients understand that I am compensated annually through the 12b-1 fees, and that they are paying for my continuing service to them. The 12b-1 fees allow us to focus on the needs of the client, puts us on the same side of the table - since we earn more if they earn more - and reduces the need to constantly sell securities to new clients. If the clients feel they are not getting adequate service for the amount paid they can always find another provider.
If you wish to truly look out for the investing public, why not look into the wrap-fee accounts in which clients not only pay the mutual fund expense, but another 1 - 2.0 on top of that for asset management. Rather than being asset managers, this has made many into asset gatherers at the expense of the public.
I have begun providing asset management services to my clients. I use no-load funds, charge a 1 annual fee, paid quarterly, and provide comprehensive monthly statements. I speak with my clients regularly and rebalance their holdings as necessary.
However, the vast majority of my clients purchased A shares in the American Funds. Under your proposed rules as I understand them, in order to continue servicing these clients, I would have to shift them from their current holdings to my asset management program so I can be compensated for the services provided. This would be more expensive to my existing clients.
It is my belief that, as in many cases, there are already enough safe guards and disclosure requirements in place. The problem is in the implementation and enforcement of the requirements.
I urge you to evaluate the total impact of your proposed rules, and confirm that all avenues of enforcement of existing rules have been explored before establishing new rules.
Robert A. Catton, MBA
Certified Financial Planner Tm
Securities and Advisory Services offered through Mutual Service Corporation, a Registered Investment Advisor. Member NASD/SIPC.