June 30, 2009
To Whom It May Concern:
I am a dually licensed registered investment advisor representative and registered representative with a large independent broker dealer. I strongly oppose the requirement in the proposed amendments to the custody rule that would subject investment advisers to a surprise audit by an accounting firm. Although I understand that there is appropriate outrage over the recent Madoff and related scandals, this newly proposed regulation would do more to undermine the financial security of the general public than it would to help improve it.
Please consider the following points:
1. The general public would be better served if additional funds were used to hire and train additional SEC staff to enforce the existing regulations already on the books. Existing rules and regulations give more than adequate ability to the governing authorities to spot irregularities and fraud by investment advisors. If there is not the staff to enforce existing regulations, then passing new regulations will do little to prevent illegal/unethical practices by unscrupulous investment advisors.
2. The amount of time and expense that it takes the average investment advisor to comply with an already complex and frequently changing regulatory environment reduces the general public's access to qualified financial advisors. As the expense of remaining compliant increases, financial advisors will raise their fees and/or they will increase the minimum account size that they are willing to service. In either case, access to qualified financial advisors will be limited more and more to the wealthiest of individuals while the general public is left to navigate the financial landscape on their own.
3. None of the recently publicized investment scandals had anything to do with the payment of fees out of an investment account and there does not seem to be an indication that there have been any systematic problems in this area.
Thank you for your consideration in this matter.
Jim Uren, CFP®