July 9, 2009
If more people in this world would be take ownership of their responsibilities and be accountable for their actions (or failure to act), this world would be a better place. Unfortunately, you cannot legislate ‘good behavior.’ There will always be ‘bad apples’ and why must the tendency continue to create additional levels of bureaucracy, regulation, and expense for the 99% of advisory firms that do their jobs for clients? We do have a great system of self-regulation (including other professional organizations such as the FPA and CFA, that Members must adhere to higher levels of ethical behavior).
I appreciate the need to strengthen investor protection in light of investment scandals (e.g. Madoff case), I feel the SEC should be given reasonable resources to audit advisory firms, not outsource that responsibility. Outsourcing creates another level of bureaucracy and expense… Simply “throwing more bodies” at this is not acceptable or prudent. How much money and resources have been allocated in complying with Sarbanes-Oxley, that could otherwise be directed to more productive enterprise?
Regarding the approach the SEC is taking in this rule (File Number S7-09-09), you are again trying to address a ‘problem’ that doesn’t exist. I do not custody client assets, and with the debiting of client accounts for management fees, we comply with your existing rules (e.g. sending detailed invoice statements, etc.). We have not had a single issue (complaint, etc.) with clients with regards to any improper debiting of management fees that wasn’t promptly and professionally handled. Again, the proposed rules will create more expense and regulation, not only at the Federal level, but also for the States.
I request instead of adding greater regulation to address either problems that cannot be eliminated (e.g. criminal acts, which by their very definition are breaking EXISTING rules) or that don’t exist (e.g. custody issues regarding debiting of client management fees), you simply enforce (or even increase the penalties for violation) existing regulations.
God bless America!
Brian Loy, CFA, CFP
Sage Financial Advisors, Inc.