From: Gair Tourtellot [gairtt@attbi.com]
Sent: Wednesday, December 04, 2002 5:00 PM
To: rule-comments@sec.gov
Subject: File No. S7-36-02

I have one statement of support, note a possible oversight, and make three
comments.

Statement. I support your proposed S.E.C. rule "Disclosure of Proxy Voting
Policies and Proxy Voting Records by Registered Management Investment
Companies." It facilitates the transparency of management already required
by legal interpretations of fiduciary responsibility.  The large total
burden hours would argue for electronic availability and reporting rather
than physical distribution of the information.

Would Exchange Traded Funds ("UITs"?) also be required to comply with the
proposed disclosure rule? They are proliferating and growing in dollar size.
They are "trapped' in the stocks of companies listed in the corresponding
index.  Presumably they also vote the shares of companies they hold, but
with even less information provided to their investors or the public, right?

Oversight.  Your explanation of the proposed rules states: "Funds would be
required to send this information [on voted proxies] within three business
days of receipt of the request [from an investor], by first-class mail or
other means designed to ensure equally prompt delivery."  However, you have
not mentioned an explicit time limit for the generation and compilation of
the information on a fund's ongoing proxy votes that will be included in the
mailing--unless they be covered by unmentioned time limits already
established for "annual and semi-annual reports to shareholders."

Comment 1. An unintended consequence of the proposed rule may be for fund
managements and boards of directors to economize by declaring the simple and
easily defended policy of always voting with the management of companies
they continue to hold.  If so, "social choice" and governance initiatives
may be harmed, contrary to the wishes of their advocates.

The proposed rule does not go far enough. The investors in mutual funds
should instruct their hired managers, or independently and directly vote,
their shares pro rata. The managers of mutual fund investments are perhaps
de jure, but not in fact, the owners of shares in the companies held in
their mutual funds but rather serve as proxies for the individual and
institutional investors who put up the money to buy shares.  The managers
are hired "managers" and not the self-interested owners.  Because the
managers may form such a large percentage of the voters in the companies
owned within their managed funds, the opinions of their investors should be
polled and proxy votes made in proportion.  I don't believe I was ever asked
to sign away my rights to vote on corporate matters simply by pooling my
money with that of other investors.  The proposed rule requires disclosure;
I suggest a mechanism be found for the managers to vote in accordance with
the wishes of their investors.  Much as you say regarding your proposed
rule, advances in technology over the last 30 years, specifically the
Internet, may allow this polling of their investors to be readily accessible
at low cost. 

Comment 2. I think you should consider extending in related form this
proposed disclosure rule to brokers and other intermediaries who make
available mutual funds to individual investors.  Currently brokers or other
intermediaries are not required to, and do not, supply communications from
the managers of mutual funds or variable accounts to investors who buy those
funds through intermediaries rather than directly from the fund family.
Either the intermediaries should be required to distribute communications
from fund managers (e.g., quarterly reports), or the names and addresses of
investors should be provided to those managers for direct mailings to their
individual investors, so that we can be equally informed.

Comment 3. I am chary of regulation in general, and monopolistic regulation
specifically, because of its frequently restrictive, cast-iron, and
inadaptive nature with unexpected consequences on the behavior of market
participants.  One of the problems with the S.E.C. and its evidently lax
regulation of corporations and CEOs in recent years is that it faces no
competition.  Without competition there is little stimulus to experiment or
innovate, no rush to respond to problems anticipated, but only to dampen
crises.  Too often regulation comes down to a matter of paper-trails rather
than intent or substance, rather more Byzantine, Spanish Empire, or
Paperwork Reduction Act of 1995 than effective (for example, your web
explanation of the proposed rule is continuously scrolling rather than
paginated for quick reference or return, and the consideration of VII.F
Significant Alternatives is restricted only to effects on small entities
rather than a spectrum of regulatory, institutional, and market alternatives
to the whole concern).  State-level SEC's could be worth the
experimentation.  

Thank you for your attention,
Gair Tourtellot