From: manhart@mail.tca.net Sent: Wednesday, December 11, 2002 9:57 AM To: rule-comments@sec.gov Subject: File Numbers S7-36-02 and S7-38-02 Re: File Numbers S7-36-02 and S7-38-02 Mr. Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street NW, Washington, DC 20549-0609 Dear Secretary Katz: My wife and I recently switched all my investments in stock mutual funds to more secure instruments. While we understand that there is always some risk in investing in mutual funds, the current state of affairs makes it clear that the individual investor does not have a chance of estimating the risks. We will keep our investments out of stock mutual funds and the stock market until the SEC takes steps to protect small investors. The rules that are currently under consideration (see below) are a step in the right direction. I am writing in support of the Securities and Exchange Commission's recently proposed rules regarding proxy voting disclosure by mutual funds and investment advisers, File Numbers S7-36-02 and S7-38-02. As a mutual fund investor, I congratulate the Commission for instituting meaningful disclosure that will surely bolster confidence in the equity markets, and strongly support the recommendations set forth in these proposed rules. I also applaud the Commission for requiring that funds and advisers disclose their actual votes, in addition to their guidelines and procedures. I disagree with those who say that mutual fund investors do not want to review their funds’ voting records, and will not use this information to inform their investment decisions. Voting guidelines provide valuable information, but voting records will provide true accountability. The rules are a major step forward in providing greater transparency to investors whose proxy assets are held in mutual funds or entrusted to investment advisers. The SEC is making a clear statement that proxy voting is a fiduciary duty and should be exercised with the best interests of fund holders in mind. Mutual funds and advisers have enormous potential to shape corporate governance and social policies at portfolio companies. Yet since the 1970s, fund participants and regulators have noted a tendency among mutual funds and advisers to automatically vote with management, wondering whether this tendency was influenced in part by a desire to win profitable 401(k) and other business from companies where proxies are being cast. It is time these potential conflicts of interest were addressed. Public disclosure of proxy-voting policies and practices would pressure fund managers and advisers to refrain from unilateral rubberstamping of management's decisions, and would provide investors additional tools to distinguish among funds in the market. Indeed, the proposed rules would not only help investors identify those funds and advisers that carefully examine proxy proposals before voting on them, but also those who emphasize strong corporate governance or high standards of corporate social responsibility. The rules would also require fund shareholders to be informed when fund managers vote counter to established voting guidelines. The rules would pressure these fiduciaries to take their voting duties more seriously, and would surely benefit investors. These rules will provide me with an opportunity to identify mutual funds and investment advisers who take their voting responsibilities seriously so that I can ensure that my investments are helping to support greater corporate accountability. Engaged proxy voting can help improve corporate governance and encourage greater social and environmental responsibility. When all mutual funds and investment advisers reveal how they cast proxy votes, enabling shareholders to know what is being done in their name, we can expect corporate governance and accountability to greatly improve. Thank you for this opportunity to comment on the proposed rules, and for taking these important steps toward restoring investor confidence in the markets. Sincerely, Jim Manhart 2910 Pueblo Court College Staiton, TX 77845 manhart@mail.tca.net