Subject: File No. S7-06-04
From: Bart E Levy

March 24, 2004


Ladies and Gentlemen,

This is the situation as I see it.

Perhaps a million individual investors acquire or dispose of exchange-listed securities such as IBM, GE and GM each year. Remarkably few complaints relating to these transactions are based on the issues of pricing now confronting the open-ended mutual fund industry.

The reason for this contrast is in my opinion, that listed securities, whether they are mutual funds or any other sort of security, carry transaction costs based on free and open negotiation and this I feel is how all mutual fund transactions must now be priced.

Consider again the lack of commission-based complaints based on listed securities. It is commonplace for one investor to pay 100 commission for 500 shares of GM while his neighbor might pay 100 for 700 shares of GM. Even if both investors paid the same commission for the same number of shares if the executed price of GM varied by one cent, neither investor would have the same percentage measured cost. Yet few if any complaints are based on percentage load differentials or preferences.

The open-ended mutual fund industry as it exists today still bears traits of the late
1960s era of non-negotiated commissions. Any and all pricing plans subsequently set forth whether B-shares, C-shares etc. leave our industry with potentially serious issues.

1 Has the mutual fund industry in adopting somewhat similar load structures, each not subject to free negotiation, engaged in some form of conscious parallelism or price cooperation?
2 Has trade been thus restrained?
3 If securities representatives present a mutual funds fee structure as non-negotiable, wont their interests be conflicted as they attempt to balance an order derived from an investors personal attributes against a rigid and non-negotiable fee structure?
4 The present contingent nature of the mutual fund sale. A clients current fee structure may be dependant on a wholly independent transaction in the past. A future transactional fee may be based on a clients purchase today. Allowing a client to negotiate their best fee today allows contractual finality, which may ultimately reduce costs.

In the end analysis investment professionals are always duty bound to look after the clients interests and to put these interests ahead of their own. Investment brokers may explain set fees as the only terms under which a mutual fund will do business. Mutual funds may explain that investors would not be introduced to their fund under any other terms. In light of the present controversy regarding mutual fund pricing, we must ask whether these are still good arguments.

Best regards,

Bart Levy