Subject: File No. S7-26-07
From: Alan Shorr
Affiliation: Chairman AFA Financial Group LLC

December 17, 2007

In the proposed exemption there is a constant mention of the role of the placement agent and the various responsibilities therein. The placement agent plays a vital role above and beyond what the exemption mentions. As the proposed exemption now reads, many of those safeguards could and more likely than not be ignored to the detriment of the investor.

In trying to interpret the intent of the exemption it appears the commission is under the belief the placement agent is independent. This is not always true. In cases where the placement agent is controlled by the RE sponsor the proposed exemption would give the sponsor absolute discretion on suitability and other regulatory matters. I do not believe the commission had this in mind. The doctrine by both FINRA and the SEC is very clear about supervising ones self. It is a recipe for disaster and abuse. The role of the placement agent for regulatory purposes is to act as a gatekeeper, thus delegating this role to the sponsor is tantamount of having the fox guarding the henhouse.

As the proposed exemption now reads there is nothing to prevent any sponsor from creating a broker-dealer, becoming its own placement agent, and employing a licensed clerical employee to sign off on all suitability issues and removing other registered representatives and broker-dealers from the process. By every standard promulgated by FINRA no single investment is suitable for everyone. Although it would make the sponsor liable to abide by rules of FINRA, including the ability of an investor to file an arbitration action, it does nothing to protect the investor. A sponsor owned placement agent would only show the CREP their own products nor would they have access to other sponsors products. It would also eliminate the protection afforded the investor by requiring a broker dealer to perform thorough due diligence on the offering. Having no outside due diligence from other members of a selling group would be eliminated and the old adage of let the buyer beware would again appear. The ultimate consequence would be a sponsor having to defend itself in a FINRA arbitration and devoting its resources to the arbitration rather than doing their primary job of that of a real estate company. Having a judgment awarded against them and hurting all of the investors from other TICs not directly affected by the specific instance is also likely.

It is our opinion language should be added to the proposed exemption mandating an independent placement agent in the TIC process in order to allow a sponsor to pay a qualified real estate agent for advice on a TIC.