Subject: File Number S7-09-09

July 2, 2009

I am an FPA member and SEC-registered investment adviser and wanted to state my opposition to the requirement in the proposed amendments to the custody rule that would subject investment advisers to a surprise audit by an accounting firm. My opposition is based on the following:

* The Madoff scandal, Stanford Financial collapse, and general headwinds of economic turmoil seem to be driving a political solution rather than laying the groundwork for an effective regulatory response. While regulations need to be effective in preventing fraud on a widespread basis and provide appropriate consumer protections, we should not get overly onerous on the vast majority of investment advisers who have not been involved in these issues.

* Appropriate and aggressive enforcement of current regulations should be the first step since the SEC and FINRA ignored warnings from the media and others in the Madoff and other Ponzi schemes.

* These scandals are completely unrelated to the deduction of fees by investment advisers. I know of no issues specific or systemic with the deduction of fees and the new regulations would prove excessively costly and burdensome, particularly for small, independent investment advisers.

* The regulations for a surprise annual audit will add costs to my business that we will ultimately have to pass on to our clients. Rather than help our clients understand the current economic turmoil and spend our time helping them position their assets appropriately, we will need to incur additional cost and resources to prepare ourselves for an annual audit. I understand the importance of compliance and a strong compliance program, but an $8,100 of cost for small firms would be onerous.

* I would support additional resources to the SEC to hire and train additional staff to bolster the effectiveness of the regular audit cycle.


Paul C Barbehenn