July 3, 2009
Dear Chairman Mary Schapiro.
& Rules Committee:
I am a Financial Planning Association Member, CFP and Registered Investment Advisor since the early 1990's.
I am 100% opposed to the SEC proposed amendment subjecting investment advisors to a surprise audit by an accounting firm.
This is certainly not cost effective to the investment industry as well as consumers and is no where near a solution to the SEC's failings in uncovering such massive fraud in year 2008 and in the 21 Century.
Actually, the SEC needs to have a full House Cleaning conducted on its Agency in addition to many other Government Agencies and Committees (i.e. House Banking Committee), after each American has seen what has occurred during the the Greatest Finanical Crisis in U.S. History.
Your addition as Chairwoman of the SEC by President Obama is at least a big step in the right direction.
I have seen the Hearings conducted on the SEC early this year and am certainly not impressed with their work. The SEC's suggestion of having CPA's conduct surprise audits shows a lack of a thorough review of their failings in the Madoff scandal as well as the conduct of some of their employees trading in firms that they are allowed to conduct reviews. This is really old business and laws should have already been on the books back in the 1930's and 1940's.
To this day, I have heard of no checklist the SEC has to properly complete their review of investment firms or companies. Most certainly, before the SEC makes any suggestion, an outside third party needs to perform a thorough review of this Agency of the Government (which is responsible for protecting the public) to drastically improve their service and protection. The SEC certainly needs to improve on their audit techniques which is more appropriate than their recommedation. Maybe the SEC should consider the use of CPA firms in the conduct of their work.
By the way, do not forget the Arthur Anderson and Enron scandal, etc., etc., etc., What makes even CPA firms the appropriate authority to conduct such reviews on behalf of the SEC?
There is much work the SEC has to perform and the Ponzi schemes not uncovered by the SEC had nothing to do with fees deducted by investment advisors. It has more to do with the SEC recommending laws, rules, and/or regulations to the President and Congress that should have been passed for purposes of requiring all independent advisor's to have their monthly investment reporting statements to be cleared and mailed by an outside third party. The global investing world expect many other charges and convictions in this industry going forward. No one should expect to get away with such conduct including congressional leaders.
Where was the SEC in identifying fraudulent and inappropriate conduct regarding the Fannie Mae and Freddie Mac downfall? They are a corporation yet a Federal Agency as well. How can they be or act as both?
Please explain why Fannie Mae and Freddie Mac allow contributions to be given to political parties? Seems that this would have been unlawful since its origination.
As stated before, there is much work to be done by the SEC and other Government Agencies. Conducting surprise audits by CPA firms on RIA's is not even near a solution to be entered on the list of recommendations.
In order to enchance consumer protection, I would support a committee established with Members of Congress that are not tainted with the Housing Crisis, Members of the Financial Planning and CPA Industry, and Members of the Regulatory Agency to determine the SEC's failure and then devise clear laws not yet on the books (but should have been long ago) to take appropriate action for identifying this type of fraudulent activity for prevention in the future.
One thing is clear. The Financial Service Industry which includes Banks, Advisors and all those that take the career seriously have been tainted badly by this crisis. It will take a long time before Consumer Confidence is restored since protection did not occur by the SEC and the Senate Banking Committee. Many consumer's futures (and this is consumers globally), were thrown up in the air like a deck of cards. Now many have to start over with nothing to show.
CPA's conducting audits for the SEC on RIA's is not the true solution. The SEC was established to do their own work and do it professionally.
Richard J. Bosler