July 24, 2009
To Whom It May Concern at the SEC,
I am a solo practitioner in a SEC registered investment advisory firm with no other employees. I am already significantly burdened by the recent new requirements for having a Chief Compliance Officer(CCO), a compliance manual, and having to conduct annual compliance reviews.
I custody with only independent custodians who provide their own monthly reporting to our combined clients. When I deduct my fees from a client's account, my custodian has controls over the size of the fee to protect the account holder, their customer too. I send an invoice with the fee calculation to the client. The client sees the fee deduction from the account in the custodian's monthly report and the fee is identified in my quarterly reports to the client.
Now you propose that my business pay for an annual surprise exam by an outside auditor. Today after ten years in the business, with 26 clients and managing around $40 million dollars, there are 26 entries per quarter to be audited. This size of audit cannot be cost effective for my firm or the audit firm - it will just be a ritual required by the SEC.
PLEASE EXEMPT THE SMALLER FIRMS FROM SUCH A SURPRISE AUDIT. A REASONABLE SIZE LIKE $250 MILLION UNDER MANAGEMENT WOULD EXEMPT A SIGNIFICANT NUMBER OF THE SMALLER FIRMS HANDLED BY THE SEC.
Thank you for your consideration of this input.
Alfred M. Sanders Jr.