MessageFrom: Robert D. Davis Jr. [rdavis@baycapital.com]
Sent: Wednesday, April 21, 2004 5:19 PM
To: rule-comments@sec.gov
Subject: File No. S7-11-04

April 22, 2004



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

Dear Mr. Katz:

I have been in the securities industry since 1969 and the portfolio manager 
for Bay Capital, Registered Investment Advisor since 1992.  As such, I use 
mutual funds and variable annuities almost exclusively as the investment 
vehicles in my practice.  I would like you to consider the following regarding 
the 2% redemption fee:    

        · There is no study that indicates that there is an industry-wide 
          problem of abusive mutual fund trading that passes on higher costs 
          to buy-and-hold investors. 
		  
        · There is no academic study that concludes that a mandatory 
          redemption fee will eliminate abusive trading of mutual funds. 
		  
        · Therefore, there is no logic in making the 90% of funds who do not 
          now have redemption fees impose such fees, most likely because they  
          have concluded they have no abusive trading problem.
		  
        · Imposing a mandatory redemption fee is equivalent to instituting a 
          tax on mutual fund investors. 
		  
        · The SEC has for thirty years led the way in lowering the costs of 
          investing for investors and it would be a radical reversal in policy  
          should the SEC vote to impose a mandatory redemption fee. 
		  
        · Should the SEC impose a mandatory redemption fee, it will be the 
          beginning of a trend that will take redemption fees out to 
          six-to-twelve months in a relatively short period of time.

        · A great deal of short-term trading of mutual funds is due to stale 
          pricing of fund shares. To this end, fair value pricing is much more 
          effective in quashing short-term trading of funds than a redemption  
          fee. 
		  
        · Funds have all the tools they need to control abusive trading of  
          their fund shares. They need only use them to be effective. The  
          solution is not mandatory redemption fees.

Sincerely,



Robert F. Thompson
Bay Capital, Registered Investment Advisor
3351 West Bearss Avenue
Tampa, FL 33618-2100
(813) 286-1553

RFT/rd