August 26, 2010
Dear Ms. Shapiro,
I am pleased to comment on the recent SEC proposal to limit
12-b1 fees for broker/dealers.
I have been in the securities industry for over 35 years and have held senior executive level positions in our nation's securities and commodities exchanges.
For the past 28 years, my firm has represented and advised retail investors, primarily retirees.
If enacted as proposed, the new rule 12b-2 will have undesirable and unintended consequences for retail investors ( the very group that the SEC seeks to protect).
I'm sure you're aware that the proposal will drive brokers who are presently transaction based (including 12b-1 fees) to a fee based platform. What you may not remember is that
the fee based platform was never intended to provide a benefit to the retail investor, but rather to "round out" the cyclical nature of transaction based revenues.
I don't believe that you will be told the truth in that regard because the "spin' has always been to suggest that this fee based platform aligns the broker's interest with the client. Actually, it was design to stabilize the revenues of the broker and their firm. For example, most firms include client's cash position in the calculated basis upon which fees are based. In the case of our firm, we estimate that our clients costs will nearly double on a fee based platform. I don't believe that is what you intended
If you'd like to learn more about the truth of fee based business and how it is designed to charge the client more
for services, please contact me via e-mail.