Subject: SEC's Proposed Changes to the Custody Rule Release No. IA-2876 s7-09-09

July 22, 2009

To Whom It May Concern:

While I certainly support the concept of enacting legislation to close the gaps that allowed Bernie Madoff to steal his clients’ funds, I am opposed to the broad brush approach that would require all SEC-registered advisers to undergo a surprise audit of their discretionary accounts. Parker Carlson & Johnson is an SEC-registered investment adviser and a FPA member. We use third party custodians for all of our discretionary accounts and deduct our management fees from them. We have no additional authority that qualifies us as a custodian. The internal controls of our third party custodians are designed to protect our clients’ assets. Our custodians send statements to our customers on a monthly basis and follow strict rules in the disbursement of funds to them. We believe our clients’ assets are well protected and therefore, the added burden of a surprise audit is an added cost with no benefit. It would also be reasonable to add a step in the SEC’s review process for advisers to examine statements prepared by custodians with those of the advisers.

Where a gap may exist is when an adviser has an affiliated entity that serves as the custodian. Additional precautions may be necessary to make up for the lack of an independent third party to provide a check and balance to the relationship.

While I support additional regulations to maintain integrity in our financial services industry, care should be taken to develop effective and efficient measures. The additional costs of a surprise audit for all SEC-registered advisers with little or no benefit to the client is a waste of resources – less profits to reinvest for the adviser and fewer tax dollars to support our government.

Kathleen Carlson, CFA
Managing Partner
Parker Carlson & Johnson
Investment Management