Subject: File No. S7-09-09
From: David Handmaker
Affiliation: SEC-Registered Investment Advisor Representative

July 1, 2009

Subjecting small investment advisors without direct custody of client assets to annual financial audits would be a waste of time for everyone involved and would increase substantially the costs of doing business for small advisors who use an outside custodian. The audit to which the outside custodian is subjected is more than enough, along with the SEC audits of the advisor, to ensure the safe treatment of client assets. Requiring small advisors to bear this cost will likely force most of them out of business, by making it prohibitively expensive to operate. As evidenced by the great number of investors who use small advisors, this would cheat many of those the SEC means to protect out of their preferred alternative for portfolio management.

Only direct custody warrants such auditing measures applying same to small advisors who do not take direct custody would increase everyone's costs, limit choices for investors, and create no meaningful value in security.