June 10, 2009
Perspective: My father has been registered with the SEC as a Registered Investment Advisor for over 30 years. We currently manage roughly $61 million.
My comments are directed solely at the portion of the proposed rule which would deem one to have "custody" due to client fees being deducted directly from client accounts, as directed by the adviser.
As many before me have already expressed, I feel this portion of the rule to be unnecessary, costly and overly burdensome. Every quarter our clients are sent an invoice along with their performance packet. A duplicate of the invoice is sent to the custodian, who then pays the bill. Clients do not have to have their fees deducted if they express to us they would rather pay by check. Additionally, for those who do have their fees deducted, they have every opportunity to review the invoice for errors, etc and respond accordingly to us or the custodian. As one previous commenter suggested, it is far from credible to believe an adviser has "drained" a client's assets via fee deductions.
Thus, it is our opinion that not only is this portion of the rule unnecessary but also it would be regressively more expensive for the smaller registered investment advisors than the larger ones and great consideration should be taken before the SEC decides that expensive surprise audits must be performed simply due to fees being paid from client funds.
Thank you for listening.