July 9, 2009
I UNDERSTAND THE NEED TO CORRECT THE ACTIONS OF THE LIKES OF MADOFF AND OTHERS WHO HAVE PRECEDED HIM. THE IDEA OF PROPOSING RULES THAT WILL HAVE “SURPRISE AUDITS” FOR THOSE RIA’S WHO SIMPLY COLLECT THEIR FEES DIRECTLY HAS NO BEARING ON WHAT MADOFF DID. MADOFF HAD CUSTODY OF THE ASSETS A GLARING DIFFERENTIAL WHICH LEAD TO HIS ABILITY TO MANIPULATE ASSETS HE HAD CONTROL OF. MOST RIA’S PUT A FIREWALL BETWEEN THE CLIENT’S ASSETS AND THEM WHICH IS PERFECT INTERNAL CONTROL AND ELIMINATES THE POSSIBILITY OF A PONZI SCHEME. THE CUSTODIAL AGENT SENDS SEPARATE STATEMENTS THAT ARE OUTSIDE OF THE CONTROL OF THE NON CUSTODY RIA. YOU ALREADY HAVE THE CONTROL IN PLACE TO PREVENT FRAUD, EMBEZZLEMENT ETC.
WHY DON’T YOU SIMPLY RULE THAT AN RIA CANNOT HAVE COSTODY OF ASSETS AND ELIMINATE EXTRA COSTS AND ACTAULLY SOLVE THE PROBLEM. HAVING SURPRISE AUDITS WILL NOT NECESSARILY PREVENT WHAT HAPPENED WITH MADOFF. CASE IN POINT, YOU ADUITED HIS ORGANIZATION AND GAVE HIM A PASS SO YOUR PROPOSAL IS NOT FOOL PROOF, SEPARATE CUSTODY IS FOOL PROOF UNLES OF COURSE YOU HAVE COLUSION. I DOUBET VERY MUCH THE LIKES OF TD AMERITRADE AND CHARLES SCHWAB WOULD COLLUDE WITH AN RIA TO PERPETRATE FRAUD; DO YOU???
PLEASE CONSIDER MY POINTS AND NOT ADD ANOTHER LAYER OF COSTLY REGULATION THAT WILL NOT EVEN ACCOMPLISH WHAT IT IS YOU ARE ATTEMPTING TO ACCOMPLISH.
THANK YOU
John E. Mullins CPA/PFS, CFP
Greystone Financial Group, Inc.