Subject: File No. S7-15-10
From: Larry Andreano

August 11, 2010

Regarding the proposal to Limiting "Ongoing Sales Charges":

The on-going sales charge is compensation to the Financial Advisor for continueing to work with a client to help them with their financial objectives. The compensation is for the Advisor to monitor the fund to ensure that it is still appropriate for the client needs and to spend time with the client in meetings or discussions so as to monitor their financial situation over multiple years.

Removing this compensation will only hurt the smaller clients as Advisors would have no incentive to spend time talking with a client that holds a fund that stops paying some compensation. Additionally there would be an incentive for an Advisor to recommend a change to a different fund once the on-going compensation expires, so that the compensation clock starts over again, even when the existing fund adequately meets the investors needs. This is exactly the opposite of what you should be incenting.

In my experience the on-going sales charge - C shares - are only used for smaller clients that do not qualify for fee based accounts. Example: a client that has $3,000 in a Roth IRA which is too small for an advisor to charge the usual annual asset based fee. Thus these fees provide a way for Advisors to receive compensation for assisting a client that they would otherwise not consider assisting.

In this case the Advisor is actually receiving a smaller fee then typical for their services (most fee based Advisors receive over 1% of assets for their services until the account is significant) and thus the client is receiving a better "deal" then even some much larger clients. Also - the on-going fee is a significantly better deal for the client then the one time fee as more of the investors funds are invested and have the potential to grow. As an example: A client that purchased a C share stock fund at the beginning of March of '09 and paid a 1% fee had 99% of their investment funds grow at over a 20% rate for the next 12 months. If it was a one time fee only 94.5% of their invested funds would have participated in that growth. The compound impact for the investor can be significant.

From my perspective - on going fees should be considered the norm and one time fees should be suspect. One time fees provide no incentive for the firm or the Advisor to maintain a relationship with the client. You have it backwards.