Subject: File No. S7-10-09
From: George P Beal
Affiliation: Partner, The Boston Family Office

July 10, 2009

We are a registered investment adviser that is deemed to have custody of client assets. For custody, we use qualified custodians, primarily Bank of New York Mellon. Our custodians hold all of the assets and send monthly statements directly to our clients. As part of our compliance procedures, we periodically review Bank of New York Mellon's SAS 70. Protecting our clients' assets is important to us, and using qualified custodians provides the proper safeguards.
Prior to 2004, our accountant was required to perform a surprise verification of client assets. Procedurally, it was cumbersome as the accountant had to be reminded to do it and then had to coordinate with the custodian (the custodian had to generate an extra set of statements and the accountant had to send them out under separate cover prior to the beginning of the next month). As many clients did not respond to the intial inquiry, the accountant had to send out reminders and then engage us to call clients. It was an expensive. time consuming process that, and I suspect a duplication of what the qualified custodians had to do as well.
In order to get a clean bill of health, qualified custodians have to prove to their auditors as well as various regulators that they are following proper procedures to make sure that client assets are safe. Requiring RIA's that use qualified custodians to also independently verify assets would be a duplication of these efforts and an unnecessary expense. I suspect it would provide little benefit and might result in higher fees for the client to help cover the cost of the additional expense.