Subject: File No. 4-606
From: Deborah Castiglioni
Affiliation: Cutter Company, Inc.

August 26, 2010

I am an owner of a small broker-dealer and SEC registered investment advisor that has been in business since 1988.

Thank you for the opportunity to comment on your study regarding the obligations of broker-dealers and investment advisors.

Let me begin by saying that it is obvious that anyone working in the financial services industry should operate in the "best interest of their clients", which on the surface, would seem to conform to having everyone operate as a fiduciary. However, there are two separate legal statutes governing the investment business (Securities Acts of 1933 and 1934 and Investment Advisor Act of 1940) and these two lines of business have evolved over the last 70+ years and the lines have blurred. They are no longer two separate silos, one easily distinguised from the other. Strangely, the way to identify which is which in today's world is largely due to how the advisor is paid (i.e. fees or commissions). This should not be the differentiator that is used to determine which hat is being worn. The suitability standard required by representatives of broker-dealers is a very stringent standard, with significant supervisory oversight by a Principal of the firm. As we operate in both the BD and IA worlds - I can tell you that compliance with the regulatory requirements for the Broker-Dealer are much more significant than those required to operate an Investment Advisor. Just to name a few: We are required to have an annual financial audit by a PCAOB auditor. We must comply with all provisions of the Patriot Act relative to anti-money laundering and "know your customer" requirements. We are required to participate in the industry sponsored continuing education program. In addition, we must comply with continuing education provided by our firm. We must have an annual anti-money laundering audit by an independent source. Testing of the firm's processes and procedures is required annually. Financials are filed with our SRO at least quarterly. At least 2 principals are required at every member broker-dealer firm. Business continuity planning is required. I'm pretty certain investment advisors are not required to perform any of the above. (Maybe this just means the broker-dealer world is over regulated...)

I believe this would be the opportune time to rethink the separate regulation that governs BD's and IA's entirely. The way registered representatives and investment advisors work with clients has melded over the more than half century since these rules were constructed. I am concerned with a piecemeal approach to fixing this issue in that broker-dealers have evolved to be quite different entities than investment advisors, at least from the standpoint of carrying inventory, providing access to initial public offerings, etc. The rules that require disclosure and pre-consent for these types of products in the advisory world are unworkable in the broker-dealer community as it exists today. Our firm does not carry inventory, nor do we have any proprietary products, so the above statements are not self-serving, but rather to point out that making one radical change without the full consideration of the impact operationally to a business model that has evolved over many years is untenable.

I would strongly encourage the Commission to take up the project of creating one new uniform set of rules, covering all financial services - regardless of whether fee-based or commission - with similar safeguards for all investors, regardless of how they prefer to pay for their services. This new rule set could then take into consideration various exemptions or other provisions that might need to be made based on the type of activity being provided to the retail customer.

I'm 100% for the protection of the customer - but let's
not waste this opportunity to repair the regulatory statutes that are far out of date and contain significant redundancies and discrepancies relative to recordkeeping, advertising, etc... when the very same activities are occuring on both sides of the business.

Thank you for your consideration.