DAVIS POLK & WARDWELL 450 Lexington Avenue New York, New York 10017 212-450-4525 August 18, 1997 Re: Proposed Amendments to Rule 24f-2 and Form 24F-2 File No. S7-19-97 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Mr. Katz: On behalf of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney Inc., Prudential Securities Inc., Dean Witter Reynolds Inc. and PaineWebber Incorporated as sponsors (the "Sponsors") of over 2,350 series of unit investment trusts ("UITs") with aggregate assets of over $32 billion, we are pleased to respond to the Commission's request for comments in Release Nos. 33-7430 and IC-22747 (the "Release") on proposed amendments to Rule 24f-2 (the "Rule") and Form 24F-2 (the "Form") under the Investment Company Act of 1940, as amended. We applaud the Commission's prompt action to implement provisions the National Securities Market Improvement Act of 1996 ("NSMIA") that simplify the current system for registering investment company securities. In particular, we welcome the proposed extension of the filing period, as well as the elimination of the requirement that a fund's annual Form 24F-2 be accompanied by an opinion of counsel. We submit, however, that a further revision to the Rule is needed to serve the public interest by saving both the Commission and UIT filers a substantial amount of time. That is, we believe that the rule should be amended so that Rule 24f-2 reports are eliminated for UITs for years in which only secondary market sales occur, since these sales represent only repurchases of units, not new issuances, and no additional fees should be due. Most UITs offer a fixed number of units which generally are sold in the first few weeks or months of the trust's existence. After the initial offering period, units that are repurchased are generally reoffered to the public by the trust's Sponsors in the secondary market maintained by the Sponsors, but no new units are issued. Therefore, each year hundreds of series of UITs file 24f-2 notices with respect to secondary market sales; for most of these notices, no fees are due. In a few instances a very small amount has been due because of time differences between when a unit is purchased by the Sponsors in the secondary market and when the same unit is resold, but the proposed amendments would eliminate these fees by means of a credit for prior year's unit redemptions. Of the $3,295,289 in registration fees paid in February 1997 by the Sponsors, $3,294,761 related to new trusts or trusts that continued to sell new units to investors. Only $528 of the fees paid was attributable to the 1,210 series that became effective prior to 1996 and that had terminated primary market sales. This represents an average of $0.44 per fund. The costs expended in preparing the notices for these 1,210 series far exceeded the amount of the fees paid. To eliminate the recurring administrative burdens and costs for both the Commission and the Sponsors without unfairly diminishing the amount of registration fees paid and collected, we propose that amendments to the Rule include a provision which would allow the registrant to notify the Commission that primary market sales have terminated. This notification could be included in the Rule 24f-2 notice filed with the Commission in the form included as Appendix I hereto. Requirements as to the notice and fee payment due under the Rule would remain unaffected until the notice is filed. Thereafter, no reports would be required for securities sold in the secondary market. As the Commission appears to have recognized when it proposed Rule 24f-3 [Investment Company Act Release No. IC-15611 (March 9, 1987)], the requirements of Rule 24f-2 as applied to unit trust secondary market sales are administratively burdensome with limited or countervailing benefit. Once the initial offering of a series is complete, aggregate sales can never exceed aggregate purchases. Yet, for each series, the Sponsors must file a separate report that requires time-consuming assembly, calculation and checking of numerical information. This process also results in administrative burdens on the Staff that, in our view, yield absolutely no benefits to investors. In light of the Commission's mandate under the Paper Reduction Act of 1995 to evaluate whether information that the Commission proposes to collect has practical utility and to minimize the burden of the collection of information on those who are to respond [44 U.S.C. ss 3501, 3506(c)(2)(A)], we submit that annual compliance with the requirements of Rule 24f-2 results in unnecessarily duplicative paperwork for funds selling only in the secondary market and is not necessary for the proper performance of the Commission's function, which could be achieved by a single filing for the year in which primary sales of the fund terminate. We believe, therefore, that the existing requirements of Rule 24f-2 are inconsistent with the criteria established by the Act. We would like to emphasize that we support the Commission in the adoption of the proposed amendments. Those amendments will undoubtedly serve to expedite the implementation of the NSMIA and thereby save time and effort for both the Commission and the filing community. We urge the Commission, however, to consider our proposal to further simplify the Rule 24f-2 filing process and eliminate over 1,000 virtually meaningless reports we file every year on behalf of the Sponsors. Very truly yours, Pierre de Saint Phalle Appendix I With respect to proposed Form 24F-2 as set forth in Appendix I to Investment Company Act Release No. IC-22747 (File No. S7-19-97): (1) A new item 9 to be added: 9. Check box if the registrant (i) is a unit investment trust and (ii) confirms that all contemplated primary market sales of its securities have been completed. (2) A new item 6 under Section A of the Instructions is to be added: 6. A unit investment trust that has terminated all contemplated primary market sales shall file this Form at the end of the fiscal year in which such primary sales terminate. Thereafter, the notice required by this Form need be filed only for fiscal years in which sales of additional units were made by the unit investment trust (other than resales of previously issued units). (3) A new paragraph (d) would be added to Reg. Section 270.24f-2: (d) A unit investment trust which has completed all contemplated primary market sales by checking the box in Item 9 of its 24f-2 notice may notify the Commission that it has completed such primary market sales. Thereafter, the notice specified by paragraph (a) need be filed only for fiscal years in which sales of additional units were made by the issuer (other than resales of previously issued units). [Original letter to follow by courier]