Reply To Arthur Levitt

William T. George P.O. Box City, State - zip December 16, 2008 Dear Mr. Levitt: Thank you for mentioning that you read my emails. You are correct; I’m not the Bill George who was once the CEO of Medtronics. If I can trust my sister’s genealogy work, that Bill George and I are not even distantly related. The part of my background that is relevant to the part of my writing you have seen is 30 plus years in the investment consulting and soft dollar brokerage industry. In the early 1970’s I was a “retail” stockbroker. In early 1976 I left the brokerage business (voluntarily). Part of the reason I left retail brokerage was the changed economics of retail brokerage caused by the mandate for fully-negotiated commissions (May Day 1975). Later, in the early 1980’s I joined SEI Financial Services Corporation. My responsibilities at SEI were the sales of sophisticated investment research and portfolio analytic services to SEI’s institutional investment advisor clients (trust companies, bank trust departments, and mutual funds). SEI had its own fully-disclosed agency brokerage division. My institutional clients paid for the research services I sold using fully-disclosed soft dollar brokerage arrangements. In the mid-1980’s I moved to Wilshire Associates’ Institutional Sales Group where I sold Wilshire’s investment research and portfolio analytics to the same kinds of institutional advisors to which I sold services while working for SEI. (Wilshire also had its own agency soft dollar brokerage division). Wilshire’s Institutional Sales Group was disbanded, as a consequence of the paucity of institutional trading, shortly after the Crash of 1987. After leaving Wilshire I began working for third party brokers who, at that time, had no proprietary research offerings. I worked as an institutional broker and sold third party research services (in sequence) for Hoenig & Company, Fidelity Capital Markets and Lynch Jones & Ryan (LJR). I was always proud of the fact that the institutional investment research I sold was competitively priced, fully-disclosed and unbiased. I have been a long term believer in the principles expressed by The Alliance in Support of Independent Research. I was working in the institutional services sales group at Lynch, Jones & Ryan during the last half of The Sweep Inspections and at the time of the September 1998 release of the OCIE’s Inspection Report on the Soft Dollar Practices of Broker-Dealers, Investment Advisers and Mutual Funds. Shortly after the release of the OCIE’s Inspection Report LJR’s institutional sales group was disbanded in preparation for the sale of LJR to Instinet. The sale of LJR was, in large part, a result of LJRs’ principals’ frustration that the Inspection Report did not mandate the unbundling and disclosure of full-service brokerage firms’ soft dollars and research services. LJRs principals recognized that this signaled a continuation of the “un-level” competitive playing field when comparing the regulatory attention focused on third party brokerage and independently produced research, (when compared) to the seeming lack of attention on full-service institutional brokers’ bundled undisclosed services.

Reply to Arthur Levitt - 12/16/08

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So, the foregoing paragraphs undoubtedly provide more information on my background than you, or probably anybody else, really cares to know. As for the goals of the writing you’ve seen, my primary goal is to highlight what I believe was the U.S. Congress’ original intent for Section 28(e) of The Securities Exchange Act of 1934. I believe the true intent of Section 28(e) was to facilitate the limited use of institutional clients’ brokerage commissions - by institutional clients’ fiduciary advisors - in the post “May Day” environment of fully-negotiated brokerage commissions. Additionally, in my writing I attempt to focus attention and stress that it’s very difficult if not impossible for regulators, trustees and clients to monitor the uses of institutional clients’ brokerage commissions, paid-up in excess of the fully-negotiated costs of brokerage execution, without the identification, pricing and disclosure of the services provided over-and-above the fully negotiated costs of transaction execution. Another of my goals is to direct attention to the long term disparity between the intense regulatory focus on soft dollars generated in fully-disclosed third party brokerage arrangements and used to acquire independently produced research, versus the seeming lack of historic regulatory attention to full service brokers’ bundled undisclosed institutional soft dollar brokerage arrangements. I believe institutional clients would benefit from conservation of capital and higher compound investment returns if the uses of their commission dollars were subject to better oversight and are more carefully managed. To your credit, Mr. Levitt, I believe you gave the institutional investment industry “a shot across the bow” which should have been adequate warning, in a series of speeches you delivered toward the end of your tenure as Chairman of the SEC. I believe the best examples of your message in this series of speeches are found in your November 3, 2000 speech titled, Costs Paid With Other People’s Money remarks before the A. A. Sommer Lectureship at Fordham Law School, New York, and your November 9, 2000 and in your Remarks Before The 2000 Meeting of the Securities Industry Association - Boca Raton, FL. Retrospectively, it seems your speeches may have been a catalyst or perhaps on-going motivation for New York State Attorney General Eliot Spitzer’s investigations of the conflicts of interest and the quid pro quos shared between the institutional advisors and full service brokers. As you know, Mr. Spitzer’s investigations contributed significantly to the SEC’s Global Research Analyst Settlement. It seems obvious that the bundled undisclosed exchange of institutional clients’ brokerage commissions paid-up in excess of the fully-negotiated costs of execution have been, and still are, the motivation for many institutional investment abuses.* * Abuses like: mutual fund shelf space arrangements, mutual fund late trading privileges, allocation of IPOs and the opportunity to ‘flip’ allocated IPOs before lock-ups terminate, corporate executives awarding 401K management contracts to brokerage affiliated asset management firms in exchange for investment banking, arrangements, personal loans, and other consideration, lavish entertainment in exchange for trading relationships, voluntary violations of Reg. FD by investment banking / brokerage firms, and etc.

Reply to Arthur Levitt - 12/16/08

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