From: Ron Meier []
Sent: Friday, May 31, 2002 4:34 PM
Subject: File No. S7-10-02

May 31, 2002

Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Dear Mr. Katz:

I hereby submit my comments regarding the proposed rule for an exemption for certain investment advisors operating through the internet. I request that the exemption be broadened slightly to accommodate advisory businesses such as mine that must register in multiple states because they provide substantially all investment advice through the internet for a flat one-time fee, with no ongoing investment supervisory relationship, and with little or no in-person contact with the client.

I do not believe that the proposed rule differentiates adequately between advisers that merely use the internet to market their business and those that conduct substantially all of their advisory business through the internet. Some advisors, like me, use the internet exclusively to conduct their investment advisory business, but do not have a website or an interactive website as the proposed rule specifies the requirement for the proposed exemption from Rule 203A. I give personalized advice through the internet, via email. Interactive websites could not be used to give the kind of personalized investment advice that is required for my advisory service, as you will see below.

I am registered as an investment advisor with the state of Colorado. My business plan is national in scope, with substantially all of my investment advisory services provided by e-commerce to or through financial planner contacts that I have throughout the country. I am the sole employee and sole investment advisor. Being an advisor in a small state, providing a limited-scope engagement, with a modest fee, does not allow me to restrict my advisory services only to a single state. I do not have a web site, but my financial planner contacts reside in almost every state. I deliver my advisory services to or through them. Multiple state registration would be an extreme hardship for me and my business. The nature of the investment advice I provide is such that I will never have $25 million under management even though I will provide investment advice through the internet to clients throughout the country that I may never personally meet, each of whom may have several million dollars of investment assets on which I give advice.

However, the investment advisory services that I offer are not considered in the restrictive definition of "internet investment advisor" as defined in the proposed rule. I request that the definition be made less restrictive, so that the Commission does not have to continually redefine narrow exemptions each time an innovative approach to e-commerce surfaces. As e-commerce continues to grow, many business approaches never considered possible are likely to surface. I want to conduct my investment advisory business in a legally and ethically proper manner, but I find that the current rules do provide some unanticipated hardships that may substantially restrict my ability to offer the investment advisory services that are in my business plan.

The part of my business plan that I request you to include in the exemption is as follows. I offer investment advisory services to or through financial planners who are investment advisors and who are the primary financial advisor to the client. All these planners have clients with assets under management. Most of those advisors have some clients who come to them with more than 10% of their total assets in the stock of a single company - generally the company they worked for or retired from (e.g., Enron). The financial planner/investment advisor knows that having more than 10% of assets in a concentrated position in a single stock is risky, but the planner does not have the skill, or the staff with the requisite skill, to analyze the company's financial statements to determine the potential risks of the stock so that he or she can communicate effectively with the client to outline the specific risks in the company and to recommend specific actions to the client with respect to that stock. Because of this skill limitation in their practice, they must outsource that service. As both a CPA and CFA, I have the education and training to read financial statements and to provide the analysis and personalized recommendations to the planner and the planner's client.

To deliver this service, I read the Form 10-K's Management Discussion and Analysis, financial statements, and footnotes, and provide a written report on the unsystematic risks in the company's stock and a personalized recommendation as to whether the client should continue to hold the stock, reduce the allocation over a period of years, sell the stock, or hedge. Because the client already owns the stock that I analyze, I do not make "buy" recommendations - only sell, hold, or hedge recommendations. I obtain information about the client's financial position, goals, and risk tolerance either from the financial advisor or the client through email. I provide the written report directly to the client and the client's advisor through email. The fee I charge for this service is a flat fee or an hourly fee, with the normal range of the fee being between $300 and $700. I do not have discretion over client assets, and any implementation actions are totally the responsibility of the client and the client's financial planner. With such a small fee, it is a hardship for me to pay the fees to register with each state. After payment of the state registration fee, there would be no profit for my service. Furthermore, planners needing to hire me to provide this service generally are time-sensitive; the time required to register with each new state generally exceeds the service expectations of the client and the client's financial planner. Given the billions of dollars that clients with concentrated positions in a single stock have lost over the past two years, the service I offer is critical to planners who do not have the in-house skills that I offer.

I recommend that the rule require that 80% of an advisor's clients obtain their advice exclusively through e-commerce, rather than 90% as proposed.

To my knowledge, I am the only advisor currently providing the type of advice described above to a national market. There may be others providing other niche investment advisory services that also could benefit from this exemption if its scope were broadened as I have suggested, to include situations where all advisory communication is by email rather than in person. Many full-service financial planners are seeking to outsource services that their clients need, but that they are not qualified to deliver. I do expect this concept of investment advisors providing niche advisory services to financial planners through the internet to grow; such growth argues for an exemption such as proposed, with the slight broadening beyond "interactive websites" that I suggest.

I suggest the following wording to section 275.203A-2(f)(1)(i): Conducts substantially all of its advisory business though an interactive website on the Internet or through internet communication vehicles such as email, where the client has little or no in-person contact with the advisory firm or its personnel.

I also suggest the following wording to section 275.203A-2(f)(1)(ii): Maintains in an easily accessible place, for a period of not less than five years from the filing of a Form ADV that includes a representation that the adviser is eligible to register with the Commission under paragraph (f)(1)(i) of this section, a record demonstrating that substantially all of its advisory business has been conducted through an interactive website or through internet communication vehicles such as email.

I also suggest the following wording to section 275.203A-2(f)(2)(ii): Substantially all means that at least 80% of the investment adviser's clients obtain their investment advice from the adviser exclusively through the interactive website or through internet communication vehicles such as email. Where the primary method of communication is through in-person contact with the client, supplemented by email communication, this exemption does not apply. Fewer than 20% of clients can receive in-person investment advice.

I also suggest new section 275.203A-2(f)(2)(iii): Internet communication vehicles such as email means that client financial information, goals, and risk tolerance are delivered through questionnaires and messages between the client, the client's other financial advisors, and the investment adviser primarily through email submission and that the investment adviser's analyses and reports to the client and the client's other financial advisers are delivered primarily through email submission.

Thank you for consideration of this request.

Very truly yours,

Ronald P. Meier, CFA, CPA
IARD CRD #112959