Subject: File No. S7-11-04
From: Brian Graff

August 24, 2004

From: Brian Graff []
Sent: Tuesday, August 24, 2004 3:52 PM
Subject: Redemption Fees (s7-11-04)

Hi Bob. The downtown grapevine is at it again. The word is spreading that, with respect to the redemption fee proposed rule, you are likely to not mandate redemption fees, but rather make mutual funds responsible for preventing market timing, which could include the imposition of redemption fees.

Is this true? If so, I can understand the reasoning given the myriad of requested exceptions you have received.

If this is the direction you are heading, would you please consider the following. The likely result will be very inconsistent redemption fee policies imposed by mutual funds. For smaller retirement plan recordkeepers this will be an enormous burden to administer and will drive up costs. For example, in addition to different levels of redemption fees, some funds may exempt certain types of retirement transactions while others may not. As you can imagine, smaller firms have little negotiating leverage with large mutual fund complexes. If possible, it would be exceedingly helpful if the final rule contained language such as:

"The Commission recognizes that it may be appropriate for fund companies, in assessing redemption fees, to exempt a large percentage of retirement plan participant trades (e.g. those not involving participant discretion) that pose little to no market timing risk."

A sentence like this would be exceedingly helpful in terms of small business recordkeeping firms negotiating with funds to achieve at least some assemblance of commonality in retirement plan administration.

Feel free to call to discuss if you wish, and thanks as always for your consideration.