From: Karl Smrekar [KSmrekar@alleghenyfinancial.com]
Sent: Tuesday, April 06, 2004 5:07 PM
To: rule-comments@sec.gov
Subject: (s7-09-04) Comments on proposed rule to prohibit the use of
brokerage commissions to finance distributions-Rule 12(b)-1.

I am specifically writing to address the appropriateness of the payment 
of 12(b)1 fees to selling brokers.

I am a securities broker who is compensated partly by commissions paid by 
mutual funds.  Current regulations require me to inform my customers of 
the commission they may pay to purchase the fund and to give them a 
prospectus to read.  

Once I make a sale and am paid a commission, I am usually called upon to 
do other work for my clients for years to come in order to service their 
accounts without additional compensation  Such service work includes 
answering questions concerning the fund including supplements to 
prospectuses, annual report and issues for voting at the annual fund 
meeting.  My work also involves providing cost basis information, 
instructing clients and their tax prepares as to how and where to report 
investment income on their tax returns. I am called upon to discuss mutual 
fund performance and to answer other questions concerning their investments, 
the securities markets and the economy in general.  Frankly my job during 
the stock market downturn of 2000-02 was to keep peoples' faith in the 
financial markets and our country in general in light of tragic news events 
and financial scandals.

I do believe that a fund which pays to me 0.25% annually based upon the 
value of a customer's mutual fund balance in an A share class of fund is 
not excessive as the work to service that fund shareholder never ends.  
The rule was originally enacted to prevent abusive practices such as 
churning and has encouraged the financial services industry to hold onto 
assets rather than looking for the next sale in order to generate a 
commission.

I also believe that funds having the C share class of funds is also 
beneficial to investors, especially during the first 7 years of the 
investment as the value of the C share fund, as compared to the same fund 
having an A shares class, will actually be greater during that period.  
The holding period for C share funds is usually only 1 year to avoid a 
1% penalty.

I do see the greatest abuse in B share class of funds as they will have 
a penalty for usually 6-8 years and either the investor forgets the penalty 
period or the broker does not disclose the period to the investor.

In conclusion I am in favor of continuing the practice of mutual funds 
paying 12b-1 fees for account servicing purposes.  I would not be opposed 
to requiring mutual funds to make the practice more evident in their 
prospectuses such as itemizing the fee or graphically making the fee 
easier to read and find in the prospectus.  

Thank you,

Karl Smrekar
Allegheny Investments/Allegheny Financial Group
3000 McKnight East Drive
Pittsburgh, PA   15237
412.536.8027

Karl

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Allegheny Investments
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3000 McKnight East Dr. 
Pittsburgh, PA., 15237 
412-536-8000