July 1, 2009
Please accept the following comment on the proposed rule:
I would like to communicate my objection to changing the definition of Advisors with Custody rule to include those Advisors who would be classified to have custody because they deduct client fees through the custodian.
Advisors deducting fees through the custodian platform have to go through deep disclosure of how fees are deducted, and have to comply with multiple layers of checks and balances through the custodial platform before the fees are issued out.
In addition, the client agrees to the direct debit of fees and the allowance for third party limited power of attorney in the forms used to set up the account.
The clients see the debit on the monthly custodial statement. In addition, when the invoice is mailed to the client, the fee calculation is shown, for the time weighted period, at what rate, and on what amount of assets for the period. Nothing is hidden.
It seems like a very unreasonable burden and expense for small firms to absorb the cost of an annual surprise audit. Furthermore it does not seem like a high-risk area that will effectively protect the public from high-risk actions, and high-risk firms.
We are also in the business, as fiduciaries, of protecting our clients, and I feel this proposal misses the mark. Thank you for considering my comments.
Kenneth W James, CFA
Greenwood Investment Management Inc.