July 15, 2009
Regarding: File Number S7-09-09
To whom it may concern:
Hello. I am writing in response to the SEC’s proposed changes to the custody rule, Release No. IA-2876.
I am a state Registered Investment Advisor, a member of the Financial Planning Association (FPA), and a Certified Financial Planner™ registrant.
I wanted to take this opportunity to formally object to the proposed amendments to the custody rule that would subject investment advisers to a surprise audit by an accounting firm, solely because those advisors automatically deduct client fees from their investment accounts. If passed, this regulation would require surprise audits at approximately 11,000 SEC and by extension many or all state registered firms. To my knowledge, this is an attempted fix to a non-existent problem, in that I am unaware of any RIA citations around the subject of inappropriate fee withdrawal from client accounts.
I can understand the need for increased regulation in the financial services industry, but as a small business owner, the costs involved in implementing these surprise audits would be extremely costly and burdensome. Ultimately, these increased costs will end up being passed on to my clients, the very individuals this additional regulation is designed to help. The net effect will be extremely harmful to my business.
In my opinion, the surprise audit proposal appears to be more of a political reaction to the very public criticism of the SEC in the wake of the Madoff scandal, as compared to an effective and legitimate regulatory response.
The Madoff scandal and other Ponzi schemes that have happened could have been prevented with proper enforcement of current rules by the SEC and FINRA. In addition, repeated warnings from the media and whistle blowers should have been the impetus for both agencies to audit this firm. The SEC should have initiated more stringent action, as Madoff was registered with the SEC as an investment adviser for the past few years. However, FINRA (and its predecessor NASD) was the regulatory body in charge of reviewing Madoff's decades-old broker-dealer business, when some of this fraud most certainly occurred.
I again urge you to reconsider this regulation and the negative impact it will have on small business owners such as myself.
Phillips (Flip) Ruben, CFP®
Certified Financial Planner™
Principal, Vision Financial Planning, Inc., a state Registered Investment Advisor
Vision Financial Planning, Inc.