Subject: File Number s7-09-09

July 16, 2009

Dear Sir / Madame,

I am an SEC-registered investment advisor. Like many of the over 10,000 advisors that are registered with the SEC, I am a relatively small firm, but take pride in serving my clients well and always having their best interest at hand.

I am adamantly opposed to the requirement within the proposed amendment to the custody rules that would subject advisors, like myself, to a surprise audit by an accounting firm. I see this as an additional government, knee-jerk reaction to the current spotlight that you are currently under. Madoff and other Ponzi schemes had nothing to do with deducting fees from client accounts held at independent custodians. I understand the pressures that you currently face, but they are the result of lack of enforcement of the existing rules and regulations. I would encourage you to focus on the true root of the issue and not add to the chaos that currently exists.

This new audit requirement will add additional direct costs (accounting fees) to my business and require precious time to deal with the requirements (opportunity costs). 80% of my fees are deducted from the independent custodian on a quarterly basis, approximately two weeks after the client has received an invoice detailing the fee and how is was calculated. My clients are well aware of the fee amount, how it will be deducted and it is clearly shown on the custodial statement. Pretty straightforward, transparent and to the benefit of the client. Under the proposed amendment, I will now incur costs that are very unnecessary, very costly and very burdensome to small, independent investment advisors like myself. Inevitably, these costs will be passed along to clients.

Ultimately, I hope that you are able to see that with this proposed amendment you are hurting the consumers that you are trying to protect. If consumer protection is the goal (and I whole heartily agree with that goal), than I suggest that Congress allocate additional resources to the SEC to hire and train additional staff to enforce the current rule and regulations that exist. That would be time and money well spent.


Kevin T. Kral, CPA/PFS, CFP
Kral Financial Advisors, LLC