Subject: S7-09-09 Beat-up RIAs with more Regulation

July 15, 2009

As a result of the Bernie Madoff and Allen Stanford cases the SEC has proposed that RIA's be subject to surprise audits if they bill client fees to account. Would this rule have prevented either of these frauds, if in place previously,with their existing auditors?

In particular the SEC has proposed that custody includes billing client accounts for fees... I know it would be cheaper and easier to have rules that require custodians to say billing management fees at no more than 1% annually and or a separate custodian confirmation annually to clients as to what fees are. This would surely accomplish more that the SEC surprise audit/custody for management fees proposal.

The SEC rule will impose such a administrative burden that small firms will go out of business or limit themselves in size to avoid the SEC strangulation . Or maybe this is the SEC's version of NAFTA ..ie to drive the jobs overseas? I know that running a small 1 man RIA office with relatively low-cost fees would not be possible any longer.

A second issue is the SEC desire to blur the distinction between stockbrokers and RIAs? Does it not serve the public to see a distinction between the two oocupations? If so why dismantle the different purposes served to the public's disadvantage.

Dave Lough, CPA-CFP
Lough Investment Advisory, LLC