July 16, 2009
A surprise audit of Registered Investment Advisors who do not ACTUALLY custody assets (not merely deducting fees) will not accomplish anything except to raise everyone’s expenses. Advisors have an excellent track record deducting fees, and clients can easily check deducted fees on their custodian-provided statement. These types of advisors (those who custody assets with a qualified custodian but deduct fees) should be EXEMPTED from the rule.
Today, virtually ALL qualified custodians send statements directly to clients at least quarterly, and usually monthly. In today's electronic age almost all clients of qualified custodians have 24/7 online access to their accounts, including the ability to view fee deductions. Clients of advisors who utilize an independent, qualified custodian have the ability to detect a fraudulent transaction within hours or at most within three months of the act.
An annual surprise examination of an advisor by a CPA to verify client assets which are not held by the advisor WILL NOT increase investor protection.
Thomas J. Bonomo
Chief Executive Officer