July 1, 2009
Gentlemen:
I am a SEC-registered investment advisor.
I am very concerned and worried about proposed amendments to the custody rule that would subject investment advisors to surprise audits.
The Ponzi schemes perpetrated by Madoff and others had nothing to do with the practice of deducting fees from clients' accounts. It appears that the proposal is a face-saving, politically motivated reaction, rather than based on a history of abuse in this area.
The proposed amendments would penalize investment advisors rather than the regulators who failed to uncover the massive frauds.
The proposed amendments would be costly and budensome; the additional costs would inevitably be passed on to clients. Importantly, they would distract advisors from their primary responsibilities of managing clients' assets.
In short, the propsed rule changes are lose-lose propositions for both investment advisors and their clients.
Jerold Tweddell, Principal
Tweddell Goldberg Investment Management