July 24, 2009
To the Securities and Exchange Commission:
We are a registered investment advisor and are writing to oppose the requirement in the proposed amendments to the custody rule that would subject investment advisers to a surprise audit by an accounting firm.
We believe the proposed amendment would unfairly burden, in terms of cost and time, smaller investment advisors, which ultimately would result in higher fees to clients. Investment management fees industry wide are already too high, resulting in reduced expected returns in client portfolios. Your proposed amendment would exacerbate this problem.
It seems this proposed amendment is a reaction to the numerous cases of fraud uncovered recently. However, I question the efficacy of requiring an audit and having investment advisors pay the auditors. Was not this very issue at the root of the recent Madoff scam? His firm was audited, but the auditor did not perform its function appropriately in order to appease an important client.
We believe there are ample regulations in place to protect the interests of investment advisors’ clients. These rules merely need to be enforced more stringently.
Thank you for your consideration of our comments.
Mark Armbruster, CFA
Portfolio Manager
Fulreader & Komma Management