July 1, 2009
Dear Sir / Madame,
Regarding the surprise audits that are being proposed per the File Number S7-09-09'. While we would be comfortable with any surprise audit of our practice, we question why this is applicable in the cases where advisors custodian our clients funds with a third party such as TD Ameritrade (this is who we use). We can understand and support the idea of surprise audits for the custodian who actually holds the account. However, in our case, we do not hold the clients money and TD Ameritrade enforces strict rules that do not allow for fee distributions from the accounts that exceed the 3% rule. So we believe that advisors and clients that have similar setups to ours already have adequate protections in place and the cost of doing audits would be unnecessary and wasteful, as resources could be used on more productive activities. We would support surprise audits of TD Ameritrade or advisors who are also brokers that custodian the client’s assets…but just don’t think this pertains to advisors that use unaffiliated third parties.
We appreciate your review of our thoughts and comments…and also appreciate your efforts to keep our industry open, honest, and safe for consumers.
While we are currently a state registered advisor, we are only a few million dollars shy of becoming an SEC-registered advisor (expected in 2009-2010 timeframe), and look forward to working with you in the near future.
Martorello Money Management, Inc.
LotusGroup Advisors, LLC.
Registered Investment Advisor