Subject: File No. S7-25-99
 
Date:    05/26/2000 11:49 AM
     
     
     
Honorable Arthur Levitt Jr.
Chairman
Securities and Exchange Commission
550 Fifth Street, N.W.
Washington, D.C.
     
re:  File No. S7-25-99
     
Honorable Levitt:
     
I am writing to clearly state my opposition to SEC Release Nos. 
34-42099; IA-1845, "Certain Broker-Dealers Deemed Not To Be Investment 
Advisers."
     
I believe the propose Rule hurts the investor for the following 
reasons:
     
O Broker-dealers taking advantage of the exception would be required to 
disclose less disciplinary information (and other information) on the 
firm as registered investment advisers will be required to disclose in 
the new Form ADV.  This is true even though broker-dealers will be 
providing the same non-discretionary advisory services as many 
registered investment advisers.
O Broker-dealer representatives are subject to a less stringent 
customer "suitability" rule, and are not generally considered to have a 
fiduciary loyalty to the client as are registered investment advisers. 
O The required "brokerage account" disclaimer will not be understood by 
the public and is completely inadequate.  The public will be unduly 
influenced by the heavy marketing of the advisory services instead of 
the brokerage services and therefore assume that the services are 
advisory, not transaction-oriented services.  This will create even 
more possibilities for confusion in the clients' minds.
O Broker-dealer representatives are not subject to the same state 
competency requirements (new Series 65 competency exam) as for those 
generally providing investment advice to the public on behalf of state 
and federally registered investment advisers.
     
In addition, I believe the intent of  regulatory action is to protect 
and inform the investor - not to remove the added layers of protection 
and information they currently receive.
     
The proposed Rule hurts investment advisers for the following reasons:
     
O Broker-dealers may use client testimonials in advertising; advisers 
are strictly prohibited from using them.  Testimonials may be very 
misleading.
O Broker-dealers that are not also registered investment advisers will 
avoid the costs of compliance required under the 1940 Investment 
Advisers Act, even though they will be able to provide the same 
services - with the exception of discretionary activities.
O Broker-dealers that are not registered investment advisers will not 
incur the significant costs associated with major revisions to the new 
Form ADV, as proposed in SEC Release No. IA-1862; 34-42620.
O Broker-dealers will have less liability because of the more stringent 
fiduciary duty under the 1940 Act.
     
In addition, it is my belief that the SEC's image of championing the 
investor will be harmed by adopting this rule.  Major consumer 
organizations, including the Consumer Federation of America and AARP, 
are strongly opposed.   Commission support of functional regulation of 
the financial services industry, as communicated to Congress during 
hearings on Glass-Steagall reform, will be called into question by the 
Commission's subsequent support to exempt extensive investment advisory 
activities from the 1940 Act.
     
I appreciate your review of these and other comments submitted to the 
Commission.
     
Very truly yours,
     
     
     
     
Ron Horvitz,
Registered Representative