Subject: File No. S7-11-04
From: Cathey Farmer
Affiliation: Compliance Associate

December 31, 2004

Thank you for the opportunity to comment on the proposed rule for mandatory short term redemption fees.

I understand the desire to prevent market timing and day traders from jumping in and out of funds as if they were watching horse races at the race track and gambling on the winner. This kind of trading creates market fluctuations and expenses to the fund companies that are passed on to the regular ivestors. A mandatory redemption fee on shares held for less than a required period of time seems like a reasonable deterent to this activity.

Speaking as an average investor in mutual funds through my retirement plan, I am somewhat concerned about this redemption fee proposal. After reading some of the commentary, I do not understand how the average investor is supposed to keep track of what each fund considers short term and what percentage will be assessed to each fund. Referring to Fidelitys table of short term redemption fees as an example, short terms and fees vary even within the same fund family. Most mutual fund investors are invested in more than one mutual fund platform. Am I supposed to keep multitudes of charts on hand as reference in addition to account statements to ensure age tracking of shares? While large broker investment institutions like Fidelity may have databases for this kind of activity, this is an unrealistic unreasonable expectation of the average investor.

Referencing Fidelitys letter again, it appears that the participant of a retirement plan will suffer the consequences of trading blackouts if a record keeper or third party administrator is not compliant with Fidelitys rules by 12/31/04. How is this possible without violating Sarbanes-Oxley and Rule 404c of ERISA? According to those regulations, it is the plan sponsors responsibility to inform the participant of trading blackouts with specific freeze and lift dates. While I, the participant, may not be Fidelitys direct client, I am an investor in some Fidelity funds. My understanding is that the recordkeeping systems may or may not be ready to track aging of shares due to patch installations, testing installs, etc. On 01/03/05, I may not be able to trade Fidelity funds because they have frozen my accounts thus forcing my plan sponsor in violation of the law. This seems to be a bullying tactic to get investors to put all of their business in the Fidelity egg basket. Frankly Im not comfortable putting all of my retirement eggs in one basket Why hasnt the SEC issued implementation guidelines to prevent large firms like Fidelity from behaving in this fasion? Shouldnt the SEC be preventing large Fidelity-type firms from driving this proposal that was initiated by the SEC?


Cathey Farmer