Subject: File No.S7-25-99 Date: 04/17/2000 9:32 AM Mr. Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0609 Re: Release Nos. 34-42099 and IA-1845; File No.S7-25-99; Certain Broker Dealers Deemed Not To Be Investment Advisers I am writing you today to comment on the proposal to exempt brokerage firms from registering as registered investment advisory firms under certain circumstances defined in the above-styled release. In my opinion, the evidence suggests that the brokerage firms, who are seeking clarification on this issue, and others, are presenting themselves to the public as objective, fee-compensated financial advisers who are primarily offering a financial advisory relationship to their customers and the public. This clearly blurs the distinction between financial advisers who are working solely in the best interests of their clients, and brokers who, with the generous help of very slick advertising campaigns, appear to be making the same offer, but are instead (in the widely-used industry parlance) merely gathering assets for their brokerage firm. This in itself would be misleading enough, in that it would allow professionals with a sales agenda to pretend that they are offering objective services. But it is much more harmful if those sales professionals who are masquerading as objective advisers are then allowed to skirt the normal disclosure requirements imposed on the community of registered investment advisers. If the brokerage firms were required to offer their ADV forms to the public, and were prohibited from offering testimonials as to the value of their services (like us under the RIA regulatory structure) then the public would have the opportunity to gauge the objectivity of the advice being offered. Under the proposal, these important safeguards would be averted altogether. There is great precedent for brokerage representatives charging fees for advice, and then selling securities or investment services (packaged or unpackaged, under a variety of compensation schemes) once the advice has been rendered in the form of a financial plan. Representatives of Financial Network Investment Corp., Royal Alliance, SunAmerica Securities, Financial Service Corporation, Securities America, Inc., Mutual Service Corporation, Commonwealth Equity, Nathan & Lewis Securities and a host of other so-called "independent" broker-dealers have been following this general regulatory course for at least the last ten years, and have adjusted to the disclosure requirements either by creating advisory entities which register their representatives as a group, or requiring their offices to register individually. The brochure rule, the prohibition on testimonials that is so clearly flouted in the brokerage industry advertisements, and the other regulatory protections of RIA registration are not too onerous for brokerage firms to comply with should they refocus and begin creating (or advertising that they want to create) advisory relationships with their customers. If the SEC's primary goal is truly to offer basic consumer protections and disclosures, then you will continue to require all who hold themselves out as investment advisers to register as such, regardless of their place of employment. Thank you for your attention. James R. Johnson, Certified Financial Planner A Registered Investment Advisor - Registered Principal with Securities America, Inc. Securities Offered Through Securities America, Inc. - member NASD and SIPC. California Insurance License number 0590718 777 Campus Commons Road, Suite 200, Sacramento, CA 95825