Subject: File No. S7-15-10
From: Thomas (Tom) A Morrison
Affiliation: CPA, CFP, Principal of Finra BD Morrison Investments, Inc.

August 9, 2010

Regarding File Number S7-15-10:

While I have not read the total SEC proposal on proposed 12b-1 revisions, I am in favor of disclosure and transparency in issues related to fees and I could even favor some aspect of 12b-1 fee negotiation. But I believe there is a significant unintended consequence related to the proposed changes to 12b-1's summarized as follows:

Many, if not most, Registered Reps are dually licensed investment advisors of a Hybrid BD both as a RR of the BD and as an individually licensed RIA or IAR of an RIA firm. As you know, there are many fee (RIA) platforms readily available to most investment professionals for an investor that has $25-$50K or more to invest. Every RIA platform I have reviewed allows my firm to charge 1% or more to the investor. For example, I recently signed an agreement to represent Morningstar's Separate Account Management service to investors where I am permitted to charge up to 1.1%/year of the investor's account balance which is over and above Morningstar's 0.40% annual cost for the service. In total, an investor can on-going incur up to a 1.5% annual fee (which is over and above the mutual fund's management and administration expenses). The flexibility to discount RIA fees is attractive, as my firm has limited our take to 0.50% of the investor's account value.

But why wouldn't any RR who might see their 12b-1 income drop, consider switching the client's money to a RIA fee program to earn the same level or more income than what they were previously earning and eliminate the limitations the SEC is considering? I've read Investment News blogs, etc., and this is the plan many advisors envision for their future. If my understanding is correct and the SEC proposal is approved, commission based product costs will be capped while RIA fees remain wide open to whatever "reasonable" fee the RIA charges. And since it is reasonably easy to switch an investor from a commission based to a fee platform, there is nothing preventing that from happening. Will the investor be better off? I doubt it.

A lesser unintended consequence of the proposed revision is investor confusion to so many share classes. While the American Funds class C shares converts to a class F-1 share after 10 years, is does not convert to class A shares. The more share classes there are, the greater is the potential confusion or eye glazing I expect to see in the consumer's eyes.

Have you thought about these issues and carefully considered the consequences?