Subject: File No. S7-09-09
From: Jeffrey N Coffee

July 12, 2009

To whom it may concern:

Thank you for the opportunity to express my opinion regarding the Securities and Exchange Commission's proposed amendments to Rule 206(4)-2.

As an investment adviser registered with the states of NV and MI, I am not currently affected by the proposed rule change, however my assets under management are growing rapidly and in a few years I expect to fall under the SEC's jurisdiction, so with this in mind I have a few concerns.

Under Rule 206(4)-2, I am deemed to have custody solely because I have the authority to deduct advisory fees from my clients accounts, all of which are maintained by an independent, qualified custodian. I firmly believe that the portion of the proposed Rule, which would require advisers with this form of custody to undergo an annual surprise audit, is unjustified.

As required by current Rule 206(4)-2, independent qualified custodian maintaining my client's accounts deliver account statements, on at least a quarterly basis, directly to my clients, identifying the amount of funds and securities at the end of the period as well as all activity in my clients accounts. As a result, my clients receive comprehensive account information directly from the qualified custodian and are thus able to monitor the activity in their accounts. It should be noted that my clients have agreed in writing that my advisory fees will be deducted directly from their accounts.

These measures provide the safekeeping currently required by Rule 206(4)-2 providing my clients with the ability to sufficiently identify and detect erroneous or fraudulent transactions.

The crimes and abuses that have occurred in the industry have not happened because of arrangements where advisers have the authority to deduct fees from accounts maintained at qualified independent custodians. The fraudulent actions have been committed by firms and individuals who have total custody of the funds and the fact that not one Ponzi scheme has occurred with an adviser who maintains funds with an independent, qualified custodian is proof that the safeguards established by current Rule 206(4)-2 are more than adequate to prevent advisers from engaging in criminal conduct.

My other concern is the cost associated with an annual surprise audit. For a small firm like mine this would cause a significant financial strain, the cost of which I would most likely pass on to my clients in the form of higher advisory fees, which is not in the best interests of my clients.

If I'm unable to pass this cost onto my clients then I would be forced to eliminate the direct debit of fees and instead require my clients to pay my advisory fees directly. This may cause undue hardship to clients as many have all their savings tied up in tax deferred accounts and may not have the money to pay management fees in which case I'd terminate the advisory agreement leaving them on their own to navigate their financial future.

The fact that the existing safeguards are more than adequate and considering the detrimental effects of a mandatory surprise audit on advisers as well as clients, I respectfully request that the SEC leave current Rule 206(4)-2 intact and unchanged with respect to advisers who have custody solely because they have the authority to deduct advisory fees from client accounts.

Thank you for the opportunity to comment on this important issue.