From: David Seely
Sent: April 6, 2005
Subject: File No. S7-11-04

Dear Sir/Madam,

I have worked in brokerage operations for 12 years and bank/trust operations for 7 years. All 19 years have been involved to some extent with mutual fund processing. I have two situations where a 2% short term trading fee was levied and I would like to get someone's opinion as to whether or not these situations fall under the intent of the rule.

First, I have a situation where, I operationally, made an error and mistakenly purchased $350,000 of a fund. I sold the shares and incurred a $4,000 market loss. I understand this loss because existing shareholders would be negatively impacted by my returning the shares to the fund at the original purchase price. I was also hit with a 2% short term trading fee because I sold within 90 days of purchasing. Operational (back office) errors have been a part of the business for decades and, in the past, the back office risk was only the change in NAV. This fund (and others) are using this short term trading fee to benefit from operational errors, not individuals or institutions trying to time the market.

My second example involves a 401k plan (where participants shares are pooled). This plan (as with many) made bi-weekly contributions through payroll. The plan sponsor decided to change investment elections. We did a total liquidation of the fund that was no longer an option, and purchased the new fund. The sold fund hit us with a 2% short term trading fee on all the contributions that had not hit 90 days old. There wasn't even a hint of short term trading, plans change their investment options routinely.

Can someone respond as to whether or not these situations fall into the intent of the rule? There is no consistency, each fund makes up their own rules. How can the SEC suggest 5 days as the definition of short term, but some funds have set their definition at 90 days and higher?

Also, entering trades after the market close has always been a violation. "Late Day Trading" only came about to reduce risk to qualified plan holders when they changed investment elections. My opinion is that if someone doesn't step in and make these rules fair and across the board, it is going to be a competitive advantage to those who waive the fee. I would be glad to talk to anyone in more detail if you want to get the perspective of a back office processor. Thanks

David Seeley
First National Bank of Omaha
WMG Operations