June 30, 2009
Ladies and Gentlemen:
My name is David Lindau. I am an FPA member and I am the president of a small SEC registered advisor firm. We use Schwab and Fidelity to custody all client assets. I would like to express my opposition to the proposed amendments that would subject investment advisors to a surprise audit by an accounting firm. I was a Certified Public Accountant for more than forty years so I have some perspective from that side as well. This surprise audit is one of those things-a knee jerk reaction in this case if you will-that sounds like a good idea but in a practical sense really is a waste of money. Typically, when we have had a failure-like the Madoff case- to apply procedures which were already in place (FINRA and SEC should have caught up with him a long time ago especially when there were complaints about him) politicians over react and institute new rules which will “catch this” in the future. These over reactions are a tremendous burden to us small operators which have always followed the rules anyway. The Madoff case which has generated this call to action had little if anything to do with fees. When extra costs like this are layered onto small business, as a business owner you have two choices. Raise your prices to the customer is one choice. Second, you can cut costs. In small business cutting costs generally means firing an employee or cutting employee benefits-like health insurance. Or some combination of both. If you want to improve consumer protection, the appropriation of additional resources to the SEC to hire and train additional examination staff to increase the regular audit cycle of investment advisors.
Please do not adopt the surprise audit requirement.