Subject: File No. S7-09-09
From: Nicholas Anastasakis
Affiliation: Vice President, Cornerstone Asset Management Services, Inc.

July 8, 2009

As an SEC registered RIA firm, I try to keep up to date on the SEC's proposed rules. This rule is definitely one that caught my eye very quickly. We are a relatively small firm, approx. $37 million AUM, and do not custody client accounts. We do however have discretion and authority to debit client accounts directly for the fees due on a quarterly basis.

I understand the need for audits in this regulatory environment, but a surprise audit that is at the expense of my firm is beyond what I would deem required. As a small firm we currently do not budget for such extreme unexpected expenses. I calculate our firm's profit ratio after paying expenses to IAR's and sub-advisers to be approximately 18bps of our AUM (18bps X AUM). We term this as operating cash flow. This operating cash flow is what is used to pay payroll, keep technology current, pay rent utilities, etc. To support an office with 4 full-time employees and 1 part-time employee, we cut it pretty close every quarter. By the same calculation, a firm with $25 million AUM, the current minimum for SEC registration, nets just $44,000 per quarter. If a surprise audit ranges between $8000 - $25,000 this represents 17 - 56% of the firm's operating cash flow and can basically mean the difference in maintaining or being forced to cut employees.

Regulation is necessary, but extreme regulation is not. Regulations are meant to weed out the 'bad apples', not to put people out of work. If surprise audits at the expense of the advisor are put into place, they should be targeted at those firms who have 'warning signs' and have experienced trouble in the past.