File No. S7-11-04From: Joseph B. Ludwig [joel@tandemfinancial.com] Sent: Friday, April 23, 2004 3:32 PM To: rule-comments@sec.gov Subject: File No. S7-11-04 April 23, 2004 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street NW Washington DC 2054900609 Re: File No. S7-11-04 Proposed Rule Mandating a Redemption Fee of 2% On Mutual Fund Shares Held Less Than 5 Days. Dear Mr. Katz: My firm is an investment advisory company registered with the SEC since 1988. We are relatively small, managing approximately $300 million for about 350 clients. Our clients are mostly middle class and upper middle class individuals or small businesses owned by them. We take exception to the proposed mandatory redemption fee for several reasons: 1. Short term trading is not illegal. It can serve investors in many ways including risk reduction and liquidity for unforeseen cash requirements. The two major culprits in the mutual fund scandals are late trading, which is clearly illegal, and stale pricing which leads to time zone arbitrage. “Fair Value Pricing” is the thing that should be required. 2. Mutual funds already have the ability to impose redemption fees of up to 2% for whatever time period they choose. If the fund feels that short term trading is adversely impacting shareholders, it should be up to the fund to set the policy, not the federal government. 3. Most 401k participants participate in payroll deduction plans so they will be “trading” every two weeks in the mutual funds that are offered in their employer plan. Under the proposal that individual will be hit with a redemption fee if he/she makes any changes in the five days subsequent to their payroll date. Similarly, we have many clients who have money taken directly from their checking account on a monthly basis which is then invested into a portfolio of mutual funds. They may find themselves in a similar situation when we alter the investment portfolio for rebalancing or for changes in specific funds. 4. If the goal is to ban short term trading, why not just disallow short term trading instead of imposing a fee that catch individual investors unaware? Thank you for permitting us to submit our opinions for consideration. Very truly yours, TANDEM FINANCIAL SERVICES, INC. Joseph B. Ludwig President Joseph B. Ludwig Tandem Financial Services, Inc. __________________________________ 25 Christina Street, Newton, MA 02461 617-969-0223 JoeL@tandemfinancial.com www.tandemfinancial.com __________________________________ This e-mail is intended for the named addressee only. It contains information which may be confidential and which may also be privileged. If you are not the intended recipient, you are notified that any dissemination of this communication is strictly prohibited. If you have received this communication in error, please return the message to the sender and then delete the message from your computer. Tandem Financial Services, Inc. is a member of the B&C Group.