WASHINGTON - The SEC is receiving more feedback from the creditunion industry on its proposal that would add more disclosures forinvestors at the point of sale. The SEC has proposed requiringbroker-dealers to provide their customers with informationregarding the costs and conflicts of interest that arise from thedistribution of mutual fund shares, 529 college savings planinterests, and variable insurance products at the point of sale.Since first proposing rule rules 15c2-2 and 15c2-3 in January,2004, the SEC has received more than 1,000 comment letters on thematter. David Bogle, a branch manager at $651 million TulsaTeachers Credit Union, is among the latest to voice concern thatthe proposal's would be expensive and compliance costs wouldeventually be passed on to investors. "I would urge the SEC torefocus its efforts on incorporating important fee information intothe prospectus which could be more user friendly," Bogle wrote inan April 6 letter to the SEC. "This would solve the problem withoutthe burden of additional regulations as discussed in the proposalpoint of sale and confirmation disclosures.Bogle also feels the"current approved sales literature and prospectus which discussesfees and sales charges give proper disclosure to clients." "Mostclients feel the guidance they receive from me at the time theaccount is established and the ongoing assistance is the mostimportant aspect of our relationship," he told the SEC. Some in thecredit union industry are questioning whether having moredisclosures will help investors with their long-term planning. JohnShartrand, chief investment officer for CAP COM Financial Services,LLC, the investment subsidiary of $410 million CapitalCommunications FCU, expressed his frustration in an April 4 e-mailto the SEC. "When I see legislation focusing solely on disclosureof fees `to help the Individual Investor' I get a littlefrustrated," Shartrand wrote. "The success of an IndividualInvestor depends on professional guidance and education NOT Feedisclosure, yet that has been the focus." Shartrand said the CUSOhas access to more than 17,411 mutual funds and variable annuitysub accounts and 1,800 "active" clients. He questioned whetherinvestors would be more inclined to read more disclosureinformation. "It has taken years to get the individual to get usedto the prospectus. Re-inventing how you disclose things will nothelp the individual," Shartrand said. In his 20-plus years ofexperience, Shartrand said he has seen "more people fail in reallife based on making wrong decision(s) then I have seen peoplesucceed because they saved twenty basis points on an investmentthey picked." By far, the SEC has been deluged with disapprovalfrom Linsco/Private Ledger, which provides third-party networkingarrangements to more than 400 credit unions and banks. At least 20representatives have written to the Commission expressing theirconcerns with the point of sale disclosure proposal. W. RobertWilson, a Lancaster, Pa.-based LPL advisor, said the proposal's"unintended consequence of substantially limiting the broaduniverse of mutual funds and variable annuities" would affectapproximately 200 of his clients while William G. Gray, III, aYucaipa, Calif.-based LPL investment representative said theproposal would impact 400 of his clients. Janetta Graber, aWichita, Kan.-based LPL registered principal relayed how some ofher clients are overwhelmed with the number of disclosures theycurrently receive. "It reached a point where the clients say"ENOUGH ALREADY!," Graber wrote. "Probably at least once a day, oneof my clients say to me `tell them to quit sending all this stuffto me.' I tell them the SEC requires it to be sent." The SEC"surely has issues of higher priority than another form that mostinvestors won't read or understand," wrote Christen Sanchez, aJacksonville, Fla.-based LPL certified financial planner. "I mightalso add that making it more complicated for clients to makeinvestment choices DISCOURAGES invest(ing) rather than help themmake better decisions," Sanchez wrote. "At a time when mostAmericans are not saving enough, making it even more confusingseems to be the wrong direction." One LPL financial consultanttraces the problem back to the "excesses of the late `90s andcorporate fraud in 2000-2002." Keith Tyner, a Fishers, Ind.-basedLPL rep said "honest" advisors will ultimately catch the heat. "Theongoing compliance requirements that have been added over the lasttwo to three years will have very little effect in deterring thedishonest financial advisors, but will clearly change the wayhonest representatives do business," Tyner wrote. The AmericanBankers Association has even weighed in on the proposal.Christopher Peterson, based in Watertown, S.D. wrote if banks arerequired to uphold a "myriad of regulations" the mutual fundindustry should be held accountable too. "In the banking industry,we strive to maintain a squeaky clean image and have myriads ofregulations that enforce it," Peterson said. "The mutual fundindustry requires the same - after all it's not our money."Consumer groups have also voiced their concerns, some of which aremixed. In a joint April 6 letter, the Consumer Federation ofAmerica, Consumers Union and Fund Democracy, Inc. applauded theSEC's strides towards "meaningful price transparency" but worriedthat the Commission's steps "have undermined their ability to servetheir intended purpose." "With comparative information removed, thedocuments no longer give investors any sense of the extent of theconflict of interest at work or how the costs compare to those ofother funds," the groups wrote. Specifically, with 12b-1 fees,grouping them with annual operating expenses "fail to make a cleardistinction between what the investor pays for the services of thebroker in selling the fund and the costs associated with operatingthe fund." Still, the groups "appreciate that requiring brokers toprovide their customers with basic information about funds at thepoint of sale is by itself a watershed event in the history of theregulation of mutual funds." -

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