From: John S. Lyons
Sent: May 3, 2005
Subject: File No. S7-11-04

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street NW
Washington DC 20549-0609

Dear Mr. Katz:

I am writing to comment on the mutual fund redemption fee issue before you. I am a Registered Investment Adviser, having established my firm in 1985 to assist investors in the management of investment risk. We use mutual funds as the investment vehicle or assist 401 k participants who select from lists of such funds.

I have actively scrutinized the sequence of events that has occurred subsequent to Eliot Spitzer's pronouncements regarding certain questionable practices on the part of the mutual fund industry. I hasten to applaud the measured and thoughtful approach taken by the SEC following the inclination of both political and industry observers to take what can be characterized as inappropriate, knee-jerk reactions to correct both real and imagined problems.

Such reactions included both proposed legislation and actual mutual fund regulations that sought to address the issues. Due to the SEC's thoughtful approach, premature legislation has been averted. However, the same cannot be said of the overreaction on the part of fund companies. Here I refer to the introduction of redemption fees by fund companies that are to be imposed upon sales of shares for periods ranging from 5 days to 3 years. Although you are aware of the fact, I will point out for emphasis that such fees have been conceived to thwart what Mr. Spitzer incorrectly termed as market timing, specifically the over night trading of stale priced mutual funds.

Need I say that the extent of time that fund companies are defining for the imposition of redemption fees is an overkill and a self-serving one at that. Although, such fees accrue to the individual funds involved, they do have the potential to improve the performance of the funds and they do provide additional shares on which the fund companies will impose a management fee. It is little wonder that many funds have been eager to layer on such fees.

The imposition of a 2% fee for redemptions within a 5 day period as the SEC has discussed is reasonable in my opinion. More stringent redemption fees should certainly be subject to the reqirements I list below or some similar ones.

1. They are to be based upon and can be verified as remedying an actual problem in terms of the magnitude of the fees.
2. They are to be based upon and can be verified as remedying an actual problem in terms of the length of time during which they are imposed.
3. They are explicitly defined in the fund prospectus.
4. They are enforced according to those specifics in the prospectus.

I include numbers 3 and 4 above because many such fund policies are vague and/or are superceded whimsically and subjectively without notification. I refer you to the attached PBGH Prospectus Supplement as but one case in point.

In closing I will say that it is my hope that this portion of the remedy for the infractions of the mutual fund scandal is not exploited by those parties who are the very object of reform, the mutual fund companies themselves. If such exploitation is allowed, the excessive and unwarranted use of redemption fees will only serve to undermine one of the salient features of open ended mutual funds, that being the liquidity that has been inherent in their use by the individual investor.

Thank you for reviewing these comments.


John S. Lyons, President
J Lyons Fund Management, Inc.
847 317-4949
Fax 847 945-6954

Attachment: pbhg_trading_policy.pdf