Convening a Working Group To Explore and Recommend Solutions To Prevent Overcharging of Mutual Fund Investors
January 15, 2003
Mr. Robert R. Glauber
Chairman and Chief Executive Officer
1735 K Street, N.W.
Washington, D.C. 20006
Mr. Matthew P. Fink
Investment Company Institute
1401 H Street, NW
Washington D.C. 20005
Mr. Marc E. Lackritz
Securities Industry Association
1401 Eye Street, NW
Washington, D.C. 20005-2225
Dear Bob, Matt and Marc:
I am writing to ask you jointly to convene a high level working group spearheaded by the NASD to explore and recommend multi-faceted solutions to prevent practices that result in overcharges to mutual fund investors.
As you are aware, on December 23, 2002, the Directors of the Division of Market Regulations and the Division of Investment Management and the NASD jointly issued a letter and Notice to Members expressing concern that mutual fund investors may not be receiving appropriate (sales loads) discounts on their transactions in mutual fund shares. In response to the SEC and the NASD action on this issue, the mutual fund and securities industries have expressed a willingness to cooperate in efforts to tackle this sales charge issue.
Given the importance of this issue, we believe the working group should be comprised of experts from the mutual fund and brokerage industries - including fund transfer agents and introducing and clearing brokers - and others knowledgeable about the issue, such as, academics, former SEC and NYSE and other SRO personnel, and consumer advocates. The working group could explore and recommend ways in which the mutual fund and brokerage industries can prevent abuses and eliminate errors in the calculation of sales loads, operational changes to ensure the accuracy of and to assist brokers in calculating sales loads, improving investor education on sales loads, and simplifying or enhancing disclosure of sales discounts (breakpoints).
I applaud your support to date. This is an issue, however, that demands the keen attention of your respective industries and I believe having a working group of true experts focus on these matters will prove to be invaluable to the investing public. Should you form such a working group, I am certain the Commission would take the greatest interest in any deliberations, conclusions or recommendations that may emanate from the effort.
Thank you in advance for your efforts. If we can be of any assistance to you, please do not hesitate to let us know.
Harvey L. Pitt
||Jill M. Considine|
Chairman and CEO
The Depository Trust and Clearing
55 Water Street
New York, NY 10041-0099