July 1, 2009
Many SEC advisors are small RIA firms with limited resources available to respond to the ever increasing wave of compliance regulations placed upon them. In order to remain viable and competative, these firms have to remain exempt from expensive financial audits and reporting requirements. Requiring our small advisory firm to pay for surprise financial audits would be a remarkable burden, typically only asked of publically traded companies. It would be reasonable to require a minimum capital reserve for RIAs with true custody of client funds, which could be verified with each ADV update. However,brodening that definition and requiring an outside financial audit would sink many RIA firms and make providing professional investment advice so costly that only the rich and elite in our society could afford this service. This would be a tremendous cost that would have to be passed on to the average investor/client. If fees are not taken more than a quarter in advance, an RIA firm should remain exempt from custody rules.