Subject: File No. S7-15-10
From: William Magnusson
Affiliation: Series 7 Registered Rep

September 16, 2010

Lowering 12b1 fees to .25% will result in loss of advice and service to the smaller, middle-class investor.
I provide both A and C shares, as well as fee-based accounts. .25% (before my expenses, taxes, and broker-dealer charges) provides only enough revenue to allow me to process address changes, etc.--nowhere near enough to provide portfolio rebalancing, ongoing client meetings, consolidated reporting, analysis, etc. Something closer to 1% is necessary to provide those valuable services. If you reduce the C-share trail to .25%, reps will stop servicing some clients and will move the rest to fee-based accounts where the 1% can still be charged. They will also turn away smaller investors. Also, smaller investors will be offered only the full-load A shares--which they often don't like. That will cause some not to invest with a profesional at all, which further removes them from those who could help them.
This matter is not about disclosure. Of course I provide prospectuses etc., but you need to know that almost no one reads them. The public understands absolutely nothing about any of this it is up to the rep to understand these things and to try to advise the client to do the best, most suitable thing. Those who invest with Registered Reps listen to and trust what he SAYS and THINKS. The pretty brochures make little difference either way, and the prospectuses and legal disclosures are almost never read or understood. We reps are the good guys, not the bad guys. The enemy is not the reps, it's the complacency and ignorance of the public. We reps are the footsoldiers in the war on poverty. Don't make it ever-harder for us to do that job. You'll hurt the people you're trying to help.
If you really want to change DISCLOSURE of 12b1 fees, fine, knock yourselves out--but please don't lower them. Lowering them will do substantial harm to the public.
Enforcement should weed out the bad apples, and regulation should provide an adequate and reasonable framework for us to help people. If you make the paperwork so burdensome, and the compensation so small that we just can't function, then the smaller investors will lose what little attention they get from reps now.
One last thing, and this one is self-serving: Some C shares I have sold were done because the investment was thought to be short-term, but some were done in order to avoid the investor having to pay the heavy front-end load. That means I voluntarily gave up a large portion of my present(and deserved)compensation, deferring it until later. If you reduce 12b1 to .25% without grandfathering existing C-shares, then you are stealing from me and what I have already earned. I know you're more concerned with the public good than with my pecuniary good, but unfairness to me is no more justifiable than unfairness to the investing public. Thank you.