From: William T. Ryan
Sent: June 13, 2007
Subject: 12 (b) 1 fees

As you know there are only two things a registered rep does with his workday, sell or service. Oddly enough, much of the emphasis of the various regulators has been on reducing costs to the consumer through reducing compensation to the rep. Reducing ongoing compensation to the representative will inevitably result in less service and vigilance on behalf of the client. That seems at odds with the purpose of the SEC as the regulator that protects the interests of the investor.

With regard to commissions versus trails, the notion that a client will receive a lifetime of careful attention because the registered rep received a commission once is wishful thinking and clearly not realistic. Payment of a trail payment generated by the imposition of a 12 (b) 1 fee is one way to encourage reps to pay attention to the clients and render the service they are being compensated for. Additionally, trail payments have long since been seen as payments for marketing expenses. They are seen as service fees. If the SEC is trying to encourage reps to be faithful to the promises they made to their clients, cutting out the revenue that permits reps to spend time on service versus selling is counterproductive.

Therefore, I propose a very simple solution. Modify rule 12 (b) 1 to acknowledge that, in a load fund world, the registered reps and their staffs do much of the service work for the client, unlike in the direct distribution sector where the fund company must bear the cost of the service function. So simply change the name of the fee to a service fee and get this behind us.

William T. Ryan
Ryan Financial Inc.
Member, NASD