File No. S7-40-02From: Bob Brady [Bob.Brady@HeritageFunds.com]
Sent: Tuesday, November 26, 2002 3:54 PM
To: 'rule-comments@sec.gov'
Subject: File No. S7-40-02

<<...OLE_Obj...>> 

November 26, 2002 

This letter responds to the Commission's request for comments in its recent 
rule proposals set forth in SEC Release Nos. 33-8138, 34-46701, IC-25775 
(October 22, 2002).

We recommend that the "financial expert" requirement not apply to registered 
investment companies.  The concerns that prompted Congress to adopt this 
requirement regarding other types of issuers simply do not apply in the 
registered investment company context for several reasons.

Unlike most other public issuers, accounting principles for registered investment 
companies are relatively straight-forward and do not involve complex matters, 
such as revenue recognition and off-balance sheet transactions.

The primary accounting issues raised in the registered investment company context 
are related to valuation practices.  These practices already are the subject of 
extensive regulation by the Commission and oversight by the entire Board of Directors 
or Trustees of registered investment companies.  Indeed, the valuation of assets must 
occur on every business day on which such a company sells or redeems it shares.  There 
is no evidence that the requirement of a "financial expert" would add meaningful 
additional safeguards to the valuation process.

Furthermore, the Commission staff conducts extensive oversight of investment companies 
through frequent on-site inspections.  These inspections simply are not part of the 
oversight structure that applies to most other types of issuers.  In addition, the 
Commission staff recently announced its intention to increase the frequency of such 
examinations.

If, notwithstanding, the forgoing, the Commission determines that the "financial expert" requirement should apply to registered investment companies, a substantial change in the definition of this term is necessary in order to make the retention of such a person 
practicable for most investment companies.

Very few people satisfy that portion of the proposed definition that requires a 
financial expert to have had experience in auditing investment company financial 
statements or to have served as the chief financial or accounting officer for 
investment companies.  Rather than require a financial expert to satisfy each of 
the criteria set forth in the Commission's proposed definition, we recommend that 
a Board be permitted to consider all of these factors, and such other factors that 
they deem appropriate, without the requirement that all of these factors be present 
or determinative.  In this connection, the Board also should be permitted to consider 
the totality of knowledge and experience of Board members, rather than only whether 
a single person on the Board has the necessary knowledge and experience.

Sincerely, 

Robert N. Brady 
President 
Heritage Asset Management 
880 Carillon Parkway 
St. Petersburg, FL 33761 
(727) 573-8143, extension 63560 

RNB:pmk