Subject: proposed custody rule (IA-2876)

July 9, 2009

I am very strongly opposed to the proposal that firms which have fees deducted from third-party custodians will be subject to surprise audits and the related costs associated with those audits.

As a small advisory firm, this additional cost to my firm will ultimately penalize both my firm and my clients without adding any benefit.

If the SEC truly sees the deduction of fees as a significant risk to clients, it would be much more efficient to conduct the audit at the custodian level. For example, the SEC could make the custodian responsible for providing the names of firms whose fees exceed a certain percentage of assets. Audits would be performed on just those firms whose fees exceed the designated threshold. This would not only save auditing costs for the vast majority of advisors (and ultimately their clients), but it would put pressure on high cost firms to reduce their fees.

John Frankola, CFA
Vista Investment Management, LLC