Subject: File No. S7-09-04
From: Valerie J. Knisley, CPA, CFP

May 5, 2004

I have the following comments:
1. A very positive development has occurred over the years since the adoption of Rule 12b-1 which I believe is of substantial benefit to fund shareholders, particularly those shareholders with relatively smaller mutual fund investments. The receipt by broker-dealers and their representative of 12b-1 fees has enabled these shareholders to receive ongoing professional services which would otherwise not be available to them or only available at additional costs to these shareholders. These services include not only administrative services, such as providing changing or correcting account information, but also substantive assistance through the provision of analysis and financial planning.
2. I note that the Commission has received numerous comment letters from brokers indicating that, without the 12b-1 fees they receive, they would not be able to provide these services to their fund shareholder clients at all or without imposing charges for these services. The incentive to receive commissions on transactions in the absence of Rule 12b-1 fees also likely would result in reduced attention paid to fund shareholders after the sales as well as possible increases in transactions in accounts - i.e. potential churning.
3. I believe that the interests of fund shareholders are best served by aligning the interests of the broker with the interests of their fund shareholder clients. This is best achieved through the receipt of Rule 12b-1 fees as opposed to incentives for transaction-based commissions or the need for additional charges to shareholders for these valuable services.