Subject: File Number S7-09-09'

July 2, 2009

I am writing to voice my opinion on the proposed rule change. I am absolutely in favor of surprise audits of advisory firms to protect not only the public, but the industry itself. However, to declare an advisor as effectively having custody simply because they can direct debit customer accounts has several negative ramifications - particularly for the smaller adviser.

#1 - The cost for a smaller firm (say under $50m in AUM) for a surprise audit by a CPA could be substantially burdensome - particularly in the current economic climate where costs are already rising substanitally faster than revenues.

#2 - Once declared as having custody, the costs for E&O coverage will jump; thereby compounding problem #1.

#3 - Advisors who "have custody" need to purchase bonds - once again ballooning the costs for a firm.

When you couple these facts with the situation that states are raising registration fees and small business tax rates, the cost to my firm would become overly burdensome. Since I am too young to retire, but too old to do something else, it will be necessary for me to raise revenues to offset the inevitable loss of income. This will be accomplished by immediately raising fees and turning away smaller clients. The irony of the these proposals is that they almost certainly harm the smaller investor that the Commission seeks to help and protect.

I would offer that the Commission could find other ways to investigate and audit firms without declaring a "having custody" term for a firm that can debit fees. Afterally, isn't there a HUGE difference between a firm that can debit fees through a non-affiliated custodian than a firm that has clients write checks directly to the firm for their actual investment? The clear answer is an astounding "yes"; however, the propsoal at hand makes no distinction between these 2 scenarios - which in the end is both foolish and hampers the Commission's ability to differentiate which firms really require a greater degree of scrutiny.

Michael F. Greco, CFP, ChFC
GCI Financial Group, Inc.