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Flasherly
Guest
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 Posted:
Sat Nov 05, 2005 5:00 pm Post subject:
Short Trading T.Rowe Price Mutual Funds is not Illegal |
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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.
....
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Mark Freeland
Guest
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| Posted:
Sun Nov 06, 2005 8:51 am Post subject:
Re: Short Trading T.Rowe Price Mutual Funds is not Illegal |
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Flasherly wrote:
| Quote: |
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
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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
http://www.sec.gov/rules/proposed/proposedarchive/proposed2004.shtml#firstq
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:
http://www.sec.gov/rules/final/ic-26782.pdf
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
nNeEwTs@sonic.net |
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Flasherly
Guest
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| Posted:
Mon Nov 07, 2005 1:01 am Post subject:
Re: Short Trading T.Rowe Price Mutual Funds is not Illegal |
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Mark Freeland wrote:
| Quote: | 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:
http://www.sec.gov/rules/final/ic-26782.pdf
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One of four hundred, believe I noticed glancing through 22c-2.
| Quote: | 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.)
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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.
| Quote: | 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.
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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.
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Mark Freeland
Guest
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| Posted:
Mon Nov 07, 2005 9:01 am Post subject:
Re: Short Trading T.Rowe Price Mutual Funds is not Illegal |
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Flasherly wrote:
| Quote: |
Mark Freeland wrote:
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[ ...]
| Quote: | http://www.sec.gov/rules/final/ic-26782.pdf
[...]
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.
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You seem to be concerned that fund families will do what credit card
issuers now do - penalize customers for activities with other
providers. Banks now routinely raise credit card interest rates if a
customer is late on a payment to *another bank*. You are suggesting
that a fund family will blacklist you if you do a lot of short term
trading at *another fund family*.
This regulation does not enable T. Rowe Price to get your trading
patterns with non-Price funds from your broker. It only requires your
broker to provide each fund (see footnote 27 for def'n of "fund") with
information on how you traded that particular fund. 22c-2(a)(2)(i)
requires intermediaries (brokers, etc.) to "Provide, promptly upon
request by the fund, the TIN of all *shareholders* that purchased,
redeemed, transferred, or exchanged shares held through an account with
the financial intermdiary, and the amount and dates of such
*shareholder* purchases, redemptions, transfers, and exchanges."
Emphasis added.
Obviously, the first occurrence of "shareholder" refers to people who
own shares of the fund requesting the information (i.e. Price would have
no access to information about you if you held no Price fund shares).
So, the second "shareholder" must mean the same thing - your purchases
of Price shares; Price doesn't get to find out about your Fidelity
shares.
All this does is give the fund family sufficient information to enforce
its rules - you can't hide behind street name registration.
I do not believe you will find a single filed comment suggesting
otherwise - the letters discussing transaction information tend to
mention four other concerns: the cost to intermediaries to provide this
information; the suggestion that intermediaries will have to alter their
privacy disclosure statements, since they will now be sharing
information (TINs) with mutual funds; ensuring that funds don't use the
info for marketing/CRM purposes; and a general concern over privacy
(investors not wanting info disclosed to funds, security of the
transmission, etc.).
(http://www.sec.gov/rules/proposed/s71104/s71104-26.pdf may be ambiguous
on sharing transaction information, as it talks about the ability of a
fund to get a complete picture of your trading activity; you might take
a look at that letter.)
| Quote: | A means to
assess the severity of a short sell penalty and/or prevention of
further trading.
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Funds used to be required to make the redemption penalty commensurate
with the short term trading costs. One of the changes made by this rule
(this particular change is already in effect) is that funds no longer
have to do a strict accounting (see footnote 34). So, while in a broad
sense the intermediary reporting requirement enables funds to judge the
impact of short term redemptions, funds no longer need to be as
meticulous.
| Quote: | [...]
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.
|
That would require fund families (houses) to share information. This
rule does not require that, nor does it facilitate it. It only lets a
fund know what shares of that particular fund you are trading. However,
Price will be able to enforce its own rules - you will not be able to
trade Price funds by trading anonomously through intermediaries (2nd
parties, using your terminology).
There is however, a large section on proposals for standardization that
requests additional comments. For example, different funds may set
different holding periods to avoid short term redemption fees. See
footnotes 37-38, 71.
| Quote: | 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.
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Finally, with respect to your particular issue with Price, you might
take a look at their comment letter, since it describes their policy
procedure in more detail. If they did not follow their own description
of what their policy means in your case, then you have a legitimate
issue you can raise with them.
http://www.sec.gov/rules/proposed/s71104/trowepricea052405.pdf
--
Mark Freeland
nNeEwTs@sonic.net |
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Flasherly
Guest
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| Posted:
Tue Nov 08, 2005 9:01 am Post subject:
Re: Short Trading T.Rowe Price Mutual Funds is not Illegal |
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Mark Freeland wrote:
| Quote: | http://www.sec.gov/rules/final/ic-26782.pdf
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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. |
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