Subject: File No. S7-25-99
From: James G Bigham
Affiliation: Managing Director, Brighton Presidio Capital Management

September 22, 2004

September 22, 2004

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549-0609

Re: Release Nos. 34-42099 and IA-1845 File No.
S7-25-99 Certain Broker Dealers Deemed Not To Be
Investment Adviser

Dear Mr. Katz,

I strongly urge the Commission to WITHDRAW the proposed rule.

In concept, the use of fee-based brokerage accounts, for which investors pay an annual fee rather than commissions on each trade, reduces the opportunity for Registered Representatives to trade excessively in order to generate larger commissions. This by all accounts appears to be a reasonable way to lower trading costs for investors. However, there are several drawbacks with the way these accounts have been implemented.

First, the accounts are portrayed as advisory relationships, not flat fee pricing for unlimited trades. The method with which the annual fee is calculated, a percentage of the value of the account, looks suspiciously like that used by Investment Advisers who are subject to the Investment Advisers Act of 1940,The Act, and its associated rules. This reinforces the concept that the Broker Dealer is providing advice, not facilitating a transaction with advice simply an incidental component. Indeed, most firms call their Registered Representatives Financial Advisors.

Second, an exemption from The Act allows the Broker Dealer offering the fee-based account to avoid the fiduciary responsibility to act in their clients best interests, requiring them to simply recommend investments that are suitable. In addition, they avoid having to disclose any conflicts of interest.

This in effect creates two de facto categories of Investment Advisors One who is required to comply with the law, and the second, who is conducting business in virtually an identical manner, but is exempt.

In my opinion, the attempt to reduce and/or eliminate churning, through fee-based accounts offered by Broker Dealers that are exempt from The Act, comes at a steep price. Advice is a core component of these accounts and therefore, firms offering them should simply comply with the law.


James G. Bigham
Managing Director
Brighton Presidio Capital Management
2500 Wilcrest, Suite 300
Houston, Texas 77042