June 30, 2009
I am an FPA member and am aware of the proposal for surprise audits of SEC-registered investment advisors merely because they extract fees from client accounts.
I am strongly opposed to this rule because this proposal is no doubt a response to Madoff-like Ponzi schemes that have absolutely nothing to do with extracting fees from client accounts. To respond to this regulatory problem with a costly ‘sledge hammer’ that has nothing to do with Ponzi type schemes is wrong-headed.
Most of the RIA business is comprised of small businesses like ours. Because our fees are tied to the value of our client accounts, we are already under financial stress. The government is out of line in proposing an expensive, ineffective approach to dealing with dishonest custodians. The issue is with the advisor has custody of client funds through an affiliated broker-dealer, not extracting fees from independent custodians.
Please stop this madness.