Short Trading T.Rowe Price Mutual Funds is not Illegal

Found filed under the Security and Exchange Commission, rules and
proposals, section 71104, mbloch6203.htm [in part]. Just wondering if
anyone knows when this sweeping industry proposal will be effected, if
soon enough to redeploy my CD redemptions, and whether I'll be
exonerated by firms, namely T.Rowe Price, who have erroneously impinged
upon my sound investment practises by blacklisting me from all further
fund trading.

Subject: File No. S7-11-04
From: Malcolm Bloch, MD

April 20, 2004

The proposal to require and/or encourage mutual funds to require an
early redemption fee is potentially harmful, mainly to small investors.
The funds are taking this as a green light to impose those fees for
redemptions as long as one year, not only five days.

Such early redemption fees should be disallowed entirely. The average
mutual fund has a turnover of over 100 per cent, with some going to 300
per cent per year. Why shouldnt the average investor have the same
right to turn over his/her portfolio? It is a fiction that mutual funds
are only for the long term investor. The need to rebalance a portfolio
varies with the outlook of the market by the investor, not a
paternalistic government.

....

Re: Short Trading T.Rowe Price Mutual Funds is not Illegal

Flasherly wrote:
>
> Found filed under the Security and Exchange Commission, rules and
> proposals, section 71104, mbloch6203.htm [in part]. Just wondering if
> anyone knows when this sweeping industry proposal will be effected, if
> soon enough to redeploy my CD redemptions, and whether I'll be
> exonerated by firms, namely T.Rowe Price, who have erroneously impinged
> upon my sound investment practises by blacklisting me from all further
> fund trading.
>
> Subject: File No. S7-11-04
> From: Malcolm Bloch, MD

If you check under the SEC's proposed rules for 2004 (the '04 is the
giveaway here), you'll find March 5, 2004: Mandatory Redemption Fees for
Redeemable Fund Securities, File No.: S7-11-04


There are a number of links there, including a link to the comment
letters that the SEC received (of which the letter you cited is one),
the body of the proposal (that says the SEC is proposing a new rule
22c-2), and a link to Final Rule IC 26782:


That final rule says that the SEC is adopting rule 22c-2 (so this is the
document you are looking for, giving timetables and terms). Dates are
on the first page. Happy reading. (BTW, the rule does NOT require a
fund to impose a short term redemption fee. See, e.g. footnote 26.)

With respect to the rebalancing concerns expressed by Dr. Bloch, see
footnote 76. With respect to the good doctor's claim that mutual funds
are not only for the long term investor, see footnotes 6-8.

--
Mark Freeland

Re: Short Trading T.Rowe Price Mutual Funds is not Illegal

Mark Freeland wrote:

> There are a number of links there, including a link to the comment
> letters that the SEC received (of which the letter you cited is one),
> the body of the proposal (that says the SEC is proposing a new rule
> 22c-2), and a link to Final Rule IC 26782:
>

One of four hundred, believe I noticed glancing through 22c-2.

> That final rule says that the SEC is adopting rule 22c-2 (so this is the
> document you are looking for, giving timetables and terms). Dates are
> on the first page. Happy reading. (BTW, the rule does NOT require a
> fund to impose a short term redemption fee. See, e.g. footnote 26.)

Not happy reading, 22c-2. What caught my eye right off is they're
proposing greater monitoring of the "omnibus" accounts -
intermediaries, brokerages, discounted - Joe's discounted source for
funds. They appear to want greater 2nd-party account information more
broadly available to the industry as a whole. If you sold XYZAB too
soon, it'll be within normal proceedures for fund owners of XYZAB to
determine what other issues apart from XYZAB, in other fund houses your
broker proved, which may or not also been sold short. A means to
assess the severity of a short sell penalty and/or prevention of
further trading.

> With respect to the rebalancing concerns expressed by Dr. Bloch, see
> footnote 76. With respect to the good doctor's claim that mutual funds
> are not only for the long term investor, see footnotes 6-8.

I shouldn't be surprised if Dr. Bloch's pertinence to industry holdings
strategy standards really is. As for what it all means - is that it is
not [or, may well] be within standards to have sold to short; in short,
they (they, of course, is a variable between houses) will advise
someone when the trader has crossed the line, is prohibited from
trading and an account is blacklisted. Sure would simplify T.Rowe
Price termination of my account if 22c-2 is standardized to include
blacklisting all instances of short-sold accounts, and all further
trades throughout all fund houses. Rules that are readily apparent and
broadly applicable do seem somehow fair, though perhaps a reserve
houses hold on that determination is an ambiguity with other purposes.

Re: Short Trading T.Rowe Price Mutual Funds is not Illegal

Mark Freeland wrote:
> > >

That would be a stretch from Bloch's paternalistic aspect, yes,
categorically to broaden fund trade rules to encompass an acceptable
determination and standard which to base such a determination short
trades involve. The omnibus account appears to have been an issue for
avoiding identification while short trading from within an
intermediary's direct influence, for which restrictive privileges,
delayment or curtailment, and all means normally applicable, were not
widely applicable to an intermediary only. I don't and didn't think
T.Rowe Price actually going Fidelity for trader practices a part of the
writ. . . .That is, as much as I apprehended Bloch's parternalistic
aspect, extensively, for consequent far-reaching implications, not
wholly a practice intrinsically without merit for much the same reason
that you cite for banks imposing restrictive means on high-debt
profiles. The stress SEC ic-26782-1 places is within some agreement a
valuation and consideration of redeemptive fees sufficient by amount
for compensation to the welfare of the fund and shareholders. Perhaps,
profiling would go so far to serve an additional benevolent,
commiserate end such fees impose. Given certain incertitudes within
market conditions and my trading practices, I have often enough,
especially of late, incurred their full measure;--alas, if only that
were an extent and my accountability. I don't suppose it really need
matter whether I sense T.Rowe Price's "blacklisting" methods coarse; or
should I take issue over purposes one might as easily be given to find
appropriate in capital elsewhere. Thank you for your reading, as well,
the thoughtful link to T.Rowe Price's redemption fee proposal to the
SEC.