July 1, 2009
I am a member of the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA) and operate a small RIA which serves roughly 250 families in West Virginia and the surrounding states. We are proud to serve our clients best interests and happily avow our fiduciary status as advisors. Our client's assets are custodied at leading custodians and we ourselves have no custody of those assets under the current definition. The client's custodian sends monthly statements and timely confirmations of all transactions. Further, they limit the amount of fees drawn on client accounts. If our firm is deemed to have custody and is therefore required to submit to surprise audits, the burdensome expense will add significantly to costs which are passed on to clients.
I am concerned that the proposed rule change is in response to political pressure and will do little to protect investors from Madoff type scams. After all, wasn't Madoff subject to surprise audits? I would suggest rather that the SEC be adequately funded and then step up its own audit efforts. An effective regulator should be able to do more to protect investors than an independent auditor.
A. R. (Rob) Hoxton IV, CFP®, AAMS