From: bnfreedman [bnfreedman@ft.newyorklife.com]
Sent: Thursday, April 29, 2004 3:18 PM
To: rule-comments@sec.gov
Subject: Additional comments on proposed 12b-1 amendments (S7-09-04)

Importance: High

The SEC has also requested comments on whether it should adopt other amendments
to Rule 12b-1 or repeal the rule in its entirety.  I am doing that now.

Many NAIFA members are licensed as registered representatives of broker-dealers
and market and service mutual funds. Up-front compensation for the initial sale
of the product is typically paid in the form of a "sales load" which comes off
the top of the client's initial investment. In addition, in return for providing
ongoing service and continuing advice to clients regarding their investments,
"reps" receive trailing compensation much in the same way that insurance agents
receive renewal commissions on the life insurance policies they sell. This
trailing compensation is typically paid under a written plan adopted pursuant to
SEC Rule 12b-1. The amount of this compensation is relatively modest; on a
$10,000 investment, the annual "12b-1 fee" that is paid for providing ongoing
service equals about $25, and this amount is shared by the broker-dealer and the
rep. These fees provide substantial value to investors--in exchange for a small
annual payment, they have access to a financial services expert to answer their
questions and address their concerns. In contrast, people who invest in mutual
funds which are purchased directly from the mutual fund company typically must
call an "800" number and speak with a different customer service representative
whenever they have questions regarding their investment.

My Position -  NAIFA and AALU strongly support the continued payment of fees
under SEC Rule 12b-1 to broker-dealers and their registered representatives as
compensation for providing continuing service to their mutual fund-owning
clients. We further support the concept of clearer, more thorough disclosure of
mutual fund fees and expenses to mutual fund investors, in order that investors
can clearly understand both the amount and purpose of such fees and expenses.
While NAIFA commends the efforts by legislators and regulators to eliminate
illegal and inappropriate practices in the mutual fund industry, NAIFA's concern
is that legitimate, appropriate compensation paid to reps for providing valuable
services to their clients will get swept up in the rush to "reign in" the mutual
fund industry.

Sincerely,

Ben Freedman, CLU