From: Passauer, Louis [lpassauer@panamericanlife.com]
Sent: Friday, April 30, 2004 8:58 AM
To: 'rule-comments@sec.gov'
Subject: File No. S7-09-04

Gentlemen:  You are correct!  Directed Brokerage can lead to conflicts of 
interest between mutual fund companies and brokerage houses.  A registered 
representative should choose a fund which best serves his clients needs, not the 
one which will compensate him the most!.  However, please don't throw the baby 
out with the bath water.  While I support your efforts to stop Directed 
Brokerage practices, I am concerned that your efforts may go too far in 
eliminating all 12b-1 fee compensation.  After the initial transaction is 
processed, registered representatives are called upon by the client from time to 
time to provide advice regarding the investment's performance, and it's 
relationship to their portfolio.  A lack of this continuing compensation, which 
is relatively small, may cause registered representatives to recommend 
inappropriate transactions to customers to "pay for their time".  In addition, 
the part of this continuing compensation that inures to the firm, helps the firm 
cover administrative costs and the costs of technology necessary to maintain the 
client's position on business held at the firm and reported as required to the 
customer on firm statements. Where the position is not held at the firm, it 
helps offset some of the filing and storage costs of maintaining duplicate 
copies of the client's statements received from the fund companies, so that the 
representative can service the client's needs for cost basis and similar 
questions.  Again, while I support your efforts to eliminate Directed Brokerage 
in this area, I strongly object to any efforts to curtail or eliminate 12b-1 
fees which are a necessary component of service after the sale.