Subject: File Number S7-09-09

July 6, 2009

As a small advisor, I am opposed to the requirement of a surprise audit for firms that are deemed to have custody solely because they withdraw fees directly from client accounts. Such a requirement does make sense for advisors that do ACTUALLY have custody of client funds. But to burden advisors that merely deduct fees, and otherwise do NOT have custody, just seems to be more of a political reaction to public criticism of the SEC and congressional pressure after the Madoff scandal than an effective regulatory response. overkill. This requirement will most certainly add additional costs to my business that I will ultimately have to pass on to my clients. Why not continue the exclusion that was previously in place?

James H. Applegate, CFP, AAMS
Chief Investment Officer

Applegate Investment Management, LLC