June 22, 2009
To the Commissioner and Staff:
Thank you for requesting comments on the proposed changes to Rule 206(4)-2. As I understand it, the proposed change would require a surprise inspection of the advisor records for advisors who have custody over client funds. The issue at hand is whether the proposed rule change should include advisors whose only action that could be construed as custody is that of direct billing of client accounts for fees due for services. The inclusion of advisors who withdraw funds only for fee billing purposes seems unnecessary given the requirement that custodians provide statements to clients showing all transactions, including fees paid to advisors, and that advisors are currently required to provide an invoice to clients showing the fee calculation at the time of the withdrawal. Requiring further non-SEC examination of records solely because of the convenience to clients and advisors of debiting fees creates an undue burden on advisors and on the oversight process as regulators must determine who is certified to conduct such exams and how results be consistently reported. Custody of assets must be regulated, but for those advisors who must provide documentation to custodians and clients on billing related activity, there is already a sufficient record of the activity to prevent abuse.
Respectfully submitted,
John Barnes
Chief Operating Officer
WHM Capital Advisors, LLC