Subject: File No. S7-10-00
From: David Riedel
Affiliation: President, Riedel Research

March 5, 2008

To whom it may concern:

I would like to weigh in on your proposed changes to the Form ADV and in particular to the enhanced disclosure within Item 12 with regard to Brokerage Practices in general and use of soft dollars in particular.

I believe that your stated aim to require a full disclosure of arrangements that we believe involve significant conflicts of interest. would be best served by disclosure of all payments of commission above the cost of execution rather than just those paid through a soft dollar arrangement to a third party. You are quite right that the use of client securities transactions to obtain research and other benefits creates incentives that can result in conflicts of interest between advisers and their clients these conflicts are just as possible when the benefits are provided by a single firm as when provided by two separate firms.

The bundling together of execution and research by a single firm creates the same conflicts of interest that you are concerned about with regard to soft dollars. In both cases the client is being asked to absorb higher transaction fees to pay for a service that the adviser considers valuable.
It is clear that the disclosure should ask whether the adviser uses client securities transactions to obtain benefits other than transaction execution. If the answer is Yes then the full range of conflicts it has when it accepts these benefits and should be described and how it addresses those conflicts should be disclosed.

When the item asks whether the adviser pays up for benefits, this should not just be limited to soft dollar benefits but rather to any situation where the adviser pays more than the lowest available cost in the market for the execution of that transaction.

The comment in footnote 98 makes this point very clearly. This note outlines the requirement that advisers to disclose whether clients pay commissions higher than those obtainable from other brokers in return for products and services. This is precisely the point of my comment. Advisers should be required to state whether they pay commissions higher than the lowest obtainable in the market and justify any such arrangements. Not just soft dollar arrangements but any arrangement that bundles execution with research or any other product (or) service.

Only by including all types of commission arrangements that combine execution with other products and services will you accomplish your goal of full disclosure of arrangements that involve significant conflicts of interest.

Please do not hesitate to contact me to discuss this in more detail.