Subject: File No. S7-25-99
From: J. Jeffrey Lambert
Affiliation: Program Director UC Davis Personal Financial Planning Certificate Program

August 24, 2004

This comment concerns the so called broker/dealer rule that exempts broker/dealers from the 40 ACT when they offer fee-based brokerage accounts. I strongly urge you to WITHDRAW this proposal. The public is being misled and mistreated.

When the rule was first proposed, I was working at Merrill Lynch. At that time, it appeared to me that the rule was proposed to accommodate the new fee based brokerage service product that Merrill Lynch had recently begun to offer. It seemed strange to me that the product was unlawful and the SEC was proposing a rule that made it legal.

I observed first hand brokers blatantly deceiving the public in the way they explained the service. It continues to this day.

Advice being delivered by these programs is not incidental. The services are being sold in ways that claim to offer advice. The public wants advice they can trust. However, they are often contacted by brokers who are not delivering advice but product sales masquerading as advisory services. Firms offering these fee based services continue to position themselves as advice givers, sound like fiduciaries, but are in reality sellers of financial products. Registered Investment Advisor regulations protect the public against self-dealing and product pushing. However, this proposed rule has confused the public and made false advertising acceptable. The rule is harmful to the public.