FPA Government Relations Office
1615 L Street, N.W., Suite 650
Washington, D.C. 20036
Web site: www.fpanet.org
By Electronic Mail
April 19, 20001
Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549-0609
Re: Release No. IC-24890; IA-1932; File No. S7-06-01; Electronic Recordkeeping by Investment Companies and Investment Advisers
Dear Mr. Katz:
The Financial Planning Association ("FPA")1 is pleased to provide comment on a technology issue where substantive and streamlined rule guidance for investment advisers is a welcome replacement to staff interpretive bulletins and no-action letters. Most of FPA's 29,000 members would be affected directly by the Securities and Exchange Commission's ("SEC" or the "Commission") proposed rule. An estimated one-quarter of our members are principals in SEC-registered firms,2 while the majority of those engaged in comprehensive financial planning are registered investment advisers with state securities administrators. Many state registrants, however, are directly affected as affiliates of SEC-registered advisers by maintaining an independent planning practice under a state registration, and acting as a supervised person of a broker-dealer's or money manager's federally registered investment adviser.
FPA supports the proposed rule. Recordkeeping is the core component of the compliance process for investment advisers and the amendments provide needed clarity that can be found in one place. As noted in recent public comment by SEC staff, the "proposed amendments to the recordkeeping rules incorporate [previous] no-action letters, eliminating many of the conditions reflected in those letters and therefore subject electronic records, regardless of how they originated, to uniform requirements."3
For business reasons cited under the proposed rule, advisers' client records are increasingly being converted to electronic storage with the objective of creating a "paperless" office environment that is still reality for only a few, but an increasingly realistic goal of many financial planners and investment advisers. FPA believes that a paperless environment can expedite client communications and implementation/monitoring of the financial plan, saving costs for both parties. The new technology is therefore highly beneficial to both adviser and client. We also believe that the proposed amendments to Rule 204-2 maintain the integrity of the rule for preserving records for staff inspection. Further, we welcome clarification in commentary to the proposed rule that adherence to it meets the obligations of the adviser under the Electronic Signatures in Global and National Commerce Act and thus provides an exclusive, uniform framework for compliance under two federal laws.
The FPA also strongly supports the Commission's view to not require adviser records to be maintained in a non-rewriteable, non-erasable ("WORM") format. It is our understanding that the cost to convert financial planning firm records to a read-only, secure format would vary widely, depending upon the size of the firm and scope of the financial planning practice, and would be burdensome for many of them. As noted in the proposed rule, unless there were a serious problem for investment advisers, as has apparently been determined by the SEC with certain brokerage firms overseen by the NASD Regulation, Inc., then investment in such new electronic recordkeeping technologies by investment advisers is unnecessary.
We would be pleased to respond to any questions in connection with these comments. Please do not hesitate to contact the undersigned at 202.626.8770.
Duane R. Thompson
Director of Government Relations
|1||The Financial Planning Association is the largest organization in the United States representing financial planners and affiliated firms. FPA maintains administrative offices in Atlanta and Denver, and a government relations office in Washington, D.C.|
|2||FPA members, including those registered as investment advisers on both state and federal levels, generally are sole proprietors or principals in financial planning firms of two to four advisers.|
|3||Speech by Paul Roye, director, Division of Investment Management, on March 26, 2001, at the Third Annual IA Compliance Summit, March 26, 2001.|