Subject: File No. S7-11-04
From: Eugene J. Asken

March 31, 2004

I oppose mandatory redemption fees for the following reasons:
Mandatory redemption fees, if imposed, will detrimentally impact millions of mutual fund investors who periodically reallocate their accounts as well as many retirees who receive periodic distributions from their retirement accounts. It is not these people who are the abusive traders of mutual funds.
Mandatory redemption fees penalize investors for managing risk in their mutual fund accounts. In a study of the SP 500 over the past 10 years, there have been 404 occurrences where an investor waiting five days to avoid a 2 redemption penalty would have experienced a greater than 2 loss. 46 occurrences would have resulted in losses from 5 to 10 while 5 of these instances would have resulted in a loss of greater than 10. this data has been posted to SAAFTINet and .
Mandatory redemption fees will limit the ability of my Registered Investment Advisor to manage my accounts effectively depriving me of professional assistance. Periodic changes in fund positions for rebalancing or changing asset allocations would have to be made on an account by account basis to avoid incurring a redemption fee in instances where I may have added or withdrawn funds recently. This will be prohibitively time consuming and costly for my advisor to administer.
Most experts agree that better solutions to curb abusive short term trading are fair value pricing and clearly stated policies on purchase and redemption policies that are uniformly enforced.
Mandatory fees should NOT be imposed by funds that do not have a problem with abusive trading. The SECs proposal amounts to price fixing. Funds should have the discretion to decide whether or not investors should be penalized to remedy a problem that may not exist.
Any redemption fees, especially mandatory fees, should only be used to recoup actual costs incurred by the fund by abusive traders. Data referred to by the SEC in accounting for the costs of abusive trading on a portfolio were over a decade old.