Subject: File No. S7-25-99
From: Blaine Dunn

September 22, 2004

September 21, 2004

Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549-0609

RE: File No. S7-25-99

Dear Mr. Katz:

The Securities and Exchange Commission should withdraw, and not amend, the proposed rule: Certain Broker-Dealers Deemed Not To Be Investment Advisers. Completely withdrawing this rule is in the best interests of the consumer which is the constituency the SEC is meant to protect.

The 1940 Investment Advisors Act requires that all advisors registered under the Act are required by law to be fiduciaries to their clients. By law, advisors are required to put the needs of their clients ahead of their own needs. The SECs proposed rule to exempt certain broker dealers and their representatives does not serve the interest of the general public nor the consumer.

If you look at broker dealer advertisements, they talk about advice. Last week, Morgan Stanley took out a two page ad in the Wall Street Journal offering consumer advice. Other broker dealers also talk about the advice they can give in their advertisements. Registered reps also offer advice in the process of selling financial products.

By offering this exemption to broker dealers, the SEC is creating two classes of financial advisors. One class is held to a high fiduciary standard. The other class, which is exempt from the Act, is held to a lesser suitability standard. The consumer will not know the difference.

If broker dealers want to be exempt form the law, they should be required to state the following:
I am a registered rep of a broker dealer.
My first obligation is to my firm and myself. As such, my primary job is to sell you the products which are most beneficial to me and my company.
By law, I do NOT have to put your needs ahead of mine, nor do I have to tell you if I benefit more from the sale of one product over another.
Also do not have to tell you if I benefit more from encouraging you to invest in a wrap account or annuity which pays me more instead of a mutual fund which pays me less even though the underlying investments in these accounts are identical.
I am paid more if I sell you product A instead of product B, but by law, I do not have to tell you that I am compensated significantly more for selling you product A over product B.

Advisors covered under the 1940 Act can state:
I am an advisor covered under the 1940 Investment Advisers Act.
By law, I am required to be a fiduciary and put your interests ahead of mine.
By law, I am required to do the best for you.
By law, I am required to resolve any conflict of interest in your favor.

As a consumer, which advisor would you prefer?

The SEC will serve the consumer best by requiring ALL people who offer financial advice to be held to the same standard. Registered reps and broker dealers offer financial advice. They should be included, and not exempted, as covered persons and firms in the 1940 Investment Advisers Act.

Withdraw, and do not amend, the proposed rule File No. S7-25-99.


Blaine P. Dunn, CFP