From: Surya Subramanian [subramas@yahoo.com]
Sent: Monday, May 10, 2004 8:35 AM
To: rule-comments@sec.gov
Subject: Comments on File No. S7-11-04

I am a small investor and almost all of my savings are
invested in mutual funds and variable annuities. I
occasionally exchange my investments among various
mutual funds available through brokerage supermarkets.


This is to request you to NOT to proceed with the
proposed mandatory redemption fee of 2% for all funds
if they are sold within 5 days. Mutual fund companies
already have all powers and flexibility to set
appropriate redemption fees where frequent redemption
will hurt the fund. For example, most international,
emerging market and small stock funds have them. If
anything, they should be more explicit about what they
consider short time versus long time. SEC's already
finalized rule 17 CFR Parts 239 and 274 [Release Nos.
33-8408; IC-26418; File No. S7-26-03] takes steps in
the right direction for this.

Various mutual fund companies like Fidelity have
already set a reasonable precedent for this by
adopting a maximum number of exchanges permitted out
of a fund in a year. All companies should follow the
policies similar to those by Fidelity.

All the abuses that happened in the last 3 or 4 years
were because of fund companies illegally colluding
with the unscrupulous operators and hedge funds to
improve their bottom line. This was clearly taking
advantage of stale pricing of international funds
because of timezone differences and illegal practice
of placing orders after the closing price in the after
hours. There was rampant corruption at work. I would
urge SEC to institute laws to make mandatory jail time
for these corrupt practices by mutual fund companies
and the various institutions involved in the routing
and execution of mutual fund buy and sell orders. 

SEC has been and should continue to be the champion of
small investors. Unfortunately, this misguided
proposal by SEC leads me to believe SEC has succumbed
to the lobbying pressure of the influential mutual
fund companies with unlimited resources. 

In place of this misguided rule proposed, I would like
to respectfully propose the following:

 Prospectuses should be clear on redemption fees and
restrictions, with telephone representatives being
better trained.
 The precedent set by the annuity companies (15 to 18
trades per year permitted, no redemption fees) ought
to be the standard.
 There should be a system of graduated fees for
in-and-out trading of the same fund, with no fee for
the first sale.
 We should be able to trade between mutual funds in a
mutual funds brokerage account "same day".
 Restrictions on future purchases of funds should not
be imposed merely for buying and selling a fund once.


Respectfully,
Surya Subramanian



	
		
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