July 2, 2009
re: File Number S7-0909
Thank you for soliciting my comments the proposed amendments.
While responsible advisors clearly want the bad guys rooted out and hung, we seem to believe that the SEC should have some super-natural ability to find these miscreants without creating an additional burden on those of us who hold our clients' interests foremost. The negative comments you will receive from advisors are bourne of the inherent abhorrence of "surprises." In the past decade we have had an abundance of surprise threats to the well-being of our clients, which, in turn, threatens the successful accomplishment of our primary mission to prudently guide our clients to their definition of success. Our natural reaction to to any surprise is, "No thanks."
Another angst-inciting term used in the proposed regulation is "mandatory." Especially for small firms, the weight of compliance to mandatory regulations, which, by the way, do not add to the coffers of our clients, and which more likely have a negative impact as they draw time and attention and resources away from the primary mission, is onerous.
IS "MANDATORY ANNUAL" EFFICIENT?
Clearly the SEC has no super-natural ability to ferret-out the crooks, without some level of burden on us all. But is a "mandatory annual surprise audit" efficient? Once a determination has been made that an advisor has been treating his clients with the utmost care and fiduciary responsibility, why continue to look in the same place over-and-over for something you already know isn't there? It sounds like an enourmous waste of resources all around.
MISDIRECTION TO THE DELIGHT OF THIEVES
I often read reports of crook discovery, where it is found that the "advisor" was not registered. This proposed rule seems to concentrate resources the Commission's attention on Registered Advisors. I wonder if that might not be to the delight of of those who conduct their illegal activities outside the purview of the SEC. Perhaps a more targeted approach toward RIAs would allow the Commission resources to seek out the unregistered criminals. Again, once you have found no wrong -- move on.
In conclusion, if news reports are correct, you would have apprehended "Bernie" long ago, if only your agents had acted upon information that clearly made him suspect. These reports seem to imply that your agents were ill-trained, inexperienced, and thus intimidated by Bernie and his nebulous scam. Respectfully, perhaps more resources should be allocated toward resolving this issue first. It seems that this rule might be in part aimed at intimidating advisors into compliance, but those of us who do it right are already intimidated, whereas the crooks never will be. They think they are smarter than you.
One suggestion for thought is to identify a means of quantifying an advisor or advisory firm's performance. It seems that every scam draws in its victims by providing unrealistic returns. Factor analysis of advisor returns would provide you with a targeted short-list of potential villains. These numbers might be better collected from the client than the advisor. I'll leave it to you to think of ways to accomplish this, but if you need some suggestions I can be reached at 724-836-7001.
Thank you and godspeed your pursuit of justice. Bring honor back to my profession of 25 years.
Brian W. Albig, CFP