July 28, 2009
Securities and Exchange Commission
Proposed Rule Change: File Number S7-09-09
We applaud the Commissions proposed rule change with respect to halting future Bernie Madoff ponzi schemes. However, adding additional accounting tasks and costs to small investment advisory firms who only are deemed to have “Custody” simply because they bill client’s account directly for their advisory fees will be counter to your intended results. We would be forced to materially change our current procedures with no added value to our clients. Our inclusion in the rule change is unfair treatment and will result in no added security or additional transparency to our clients accounts. Our client’s accounts and their securities are held by a qualified third party custodian. All security transactions are done by the custodian and the custodian holds the assets and produces monthly statements. We keep no client assets in our name, have no trust account and process no cash transactions. Our clients are billed quarterly through the custodian and are notified by the custodian with a transaction notice as to the amount of the transaction at the time of the transaction and all transactions are noted on the monthly statement. We notify the client quarterly of our fees and fee schedule.
We urge you to modify the proposed rule change as written to exclude firms such as ours, who’s only inclusion in the custody definition is that we bill client accounts for our fees. The rule change will add costs and procedures that we will be responsible for that will not provide any meaningful information or procedural changes that enhance the safety or transparency of our client’s accounts. The result may in fact be, if we are not excluded, that we will be forced to raise our fees to our clients to cover the added regulations costs that, in practice, add no additional safety or useable information to our clients.
George B. Gordon