July 1, 2009
Regarding SEC’s Proposed Changes to the Custody Rule Release No. IA-2876, “Custody of Funds or Securities of Clients by Investment Advisors:”
As a member of the Financial Planning Association and as an investment advisor I am adamantly opposed to the proposed amendments to the custody rule that would subject investment advisors to a surprise audit by an accounting firm.
Some of the reasons for this opposition include: (1) One of the major problems with the custody rule was resolved by the SEC when the loophole from registration for certain accounting firms was eliminated. (2) The Madoff and other Ponzi schemes resulted from a lack of aggressive enforcement by the SEC and FINRA of current rules. The SEC should hold FINRA accountable for its shared oversight of Bernie Madoff in conducting the Ponzi scheme, probably for decades, as a broker dealer before registering two years ago as a investment advisor. Why not allocate more resources to the SEC to hire and train additional staff to enforce existing rules? That would get support from me. (3) The proposed surprise audit has the appearance of a political reaction to public criticism of the SEC and congressional pressure after the Madoff scandal rather than an effective regulatory response. (4) The fraudulent schemes that have recently been discovered by the SEC have little or nothing to do with fees deducted by investment advisors. There is scant history of systemic problems in this area. This is an unjust and costly burden for investment advisors.
Lowell R. (Lou) Lemesany
Certified Financial Planner (CFP)
Ameriprise Advisor Services, Inc.