BlankFrom: James H. Applegate, CFP [japplegate@aimria.com]
Sent: Wednesday, May 05, 2004 8:54 PM
To: rule-comments@sec.gov
Subject: File No. S7-11-04

May 5, 2004

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC  20549-0609 

Dear Sirs:

I am a fee-only registered investment advisor managing clients' assets using 
primarily mutual funds. I do not trade on a short term basis but I strongly 
oppose this proposed mandatory 2% redemption fee. I believe that enactment of 
this rule will punish the very investors you are trying protect.

Currently, the mutual fund companies already have the ability to impose 
redemption fees of up to 2% if they find that short-term trading adversely 
impacts their other shareholders. (I have yet to see any fund provide evidence 
that this is the case.)  Since most funds have chosen not to do so, it would 
seem to me that they don't feel it is a problem.  This rule would just create 
a new revenue stream for the fund industry which I strongly oppose.

This rule would also unfairly limit investors' access to their money.  If an 
investor has an emergency and needs to get funds out shortly after investing, 
he get penalized.  

Investors making regular, frequent contributions to 401(k) plans will be 
penalized if they happen to rebalance within 5 days of their most recent 
contribution.  In most cases, they have no control over when the money is 
actually posted to their accounts and probably don't even know until after 
they receive a quarterly statement. How are they supposed to know when it is 
safe to rebalance? 

If the purpose of this rule is to stop the stale price trading, I would think 
that some sort of fair value pricing policy would make more sense.

There are other reasons but, suffice it to say, I think this is a BAD rule and 
I strongly oppose it.  I urge you to withdraw this proposal.


Respectfully,

James H. Applegate, CFP®, AAMS®
Applegate Investment Mgmt, LLC