Subject: File No. S7-25-99
From: Stephen P. Moulton, CFA
Affiliation: Pres. CEO, Stephen P. Moulton Associates, Ltd.

November 10, 2004

I am an investment adviser registered with the SEC, and have been so registered since 1994. Many of my clients are individual investors of limited financial sophistication. Prior to registration as an adviser, I was a registered representative and investment adviser agent with a major wirehouse and a regional broker from 9/84 to 9/94. During that time, I held Series 7, 63 and 65, and much of my income came from wrap fee accounts.

While some believe the current rules governing registered investment advisers are onerous, I believe they operate to provide a significant degree of protection for investors, especially for clients of limited financial sophistication. The rules make it clear that the registered investment adviser is a fiduciary and expect advisers to conduct their business in a manner appropriate to their responsibilites to clients. The recent additions to the rules, with respect to compliance policies and codes of ethics, comport with that view of advisers and their responsibilities to clients.

As discount brokers have continued to garner larger market share, the major wirehouses have continued to move towards providing more expanded services to justify their fees. The major wirehouses have expanded offerings and marketed themselves in a manner intended to blur the distinction between advisers and brokers. While holding themselves out as trusted advisers, the brokers have continued to avoid being deemed having fiduciary responsibility to clients.

This proposed rule simply takes brokers further down this path, with the blessing of the SEC. If it looks like a fox and smells like a fox, dont continue to be deluded into treating it as a rooster and letting it stay in the henhouse. To adequately protect investors, as was the intention of the 1940 Act, the advisory activities of brokers should be regulated on the exact same basis as all registered advisers. Is it perfectly clear to the investor that their registered representative is selling a product, as opposed to managing their portfolio? For too long, the Commission has provided the major wirehouses special treatment.

The Commission should draw the distinction based on what financial services firms do and how the firms and their representatives hold themselves out to the public, not based on whether they are currently registered as a broker or adviser. Merrill Lynch has been holding itself out to the public as a trusted adviser for decades - its about time that their advisory activities were regulated on the same basis as ALL registered advisers.