Subject: File Number S7-09-09

July 7, 2009

Dear SEC:

The proposed new rule which would subject SEC registered advisors having custody of client funds to surprise audits is basically reasonable with one huge exception. To subject advisors to this requirement who are deemed to have custody solely by virtue of the fact that they have client authorization to debit fees from client accounts is completely unreasonable. While it is unquestionable that this provision in the proposed rule would increase advisorsí cost of doing business, there would be virtually no benefit to anyone to offset this added cost. Any knowledgeable observer must view this provision as egregious regulatory overkill.

Kevin F. O'Grady
Palo Capital, Inc.