From: Todd C. Ganos [tganos@pacbell.net] Sent: Wednesday, June 26, 2002 6:08 PM To: rule-comments@sec.gov Subject: File No. S7-25-99 Dear Commissioners, I would like to express my strongest opposition to the proposed rule under File No. S7-25-99. Through the various Acts, Congress has made it clear that the public interest and protection demands that the securities industry must be regulated. For 60-plus years, Congress and the Commission have recognized that broker-dealers and investment advisers provide important yet separate and distinct services to the investing public. As such, Congress and the Commission created specific Acts, Rules, and Regulations suited to regulating those separate and distinct funcitons. Through the Act, Rules, and Regulations governing investment advisers, as well as rulings by the Court, investment advisers are fiduciaries. As such, there are certain duties that a provider of investment advice owes a client. A key duty is disclosure. In their compliance examinations of investment advisers, the very thing the Commission's examiners first ask to see from an investment adviser is its Form ADV Part II, i.e., its disclosure brochure. My firm having recently received an examination by the Commission, I can say that the examiner appropriately reviewed our disclosure brochure to ensure that our firm -- as a fiduciary -- made all necessary disclosures to the public regarding our investment methodology and strategy, brokerage practices, fees, conflicts of interests, and so forth. Under the proposed rule, certain broker-dealers would be deemed not to be investment advisers. As such, these certain broker-dealers would not be held to the fiduciary duties incumbent on a fiduciary and not required to inform current or prospective clients of information that registered investment advisers are required to disclose. For roughly two or so years, in anticipation of acceptance of this proposed rule, broker-dealers are already offering investment advisory services as envisioned by Congress and the Commission as requiring regulation as an investment adviser. ----- Here's the real problem: Investors are screaming for disclosure. As we move through one disclosure disaster after another -- Waste Management, Enron, Tyco, Worldcom, Arthur Andersen, etc. -- it has become clear the investing public has lost trust in the capital markets and its auditors. As we move from one corrupted analyst and investment bank after another -- Merrill Lynch, Morgan Stanley, Solomon, etc. -- it has become clear the investing public has lost trust in advice givers. This lack of trust does not facilitate efficient capital markets nor an efficient economy. In the textbooks, the academics call it a "market failure". These failures have directed particular scrutiny toward the Commission's shortcomings. Now, the Commission is proposing to allow broker-dealers engaging in investment advisory services to be exempt from the fiduciary duties and to forego disclosure . . . to ride the Wild West unencumbered. The public would simply not understand. Even if the Commissioners really believe this is the best way to go, the public would simply not understand. I believe the Commission would lose political credibility and public confidence. I'm a hands-off, free market type. But, I've seen enough in my years to know that this proposed rule is misguided given the current environment. Everyone needs to be regulated by the same standard and that standard needs to be high. I urge the Commissioners to withdraw this proposal . . . in the best interest and protection of the public. Thank you for your time. Sincerely, Todd C. Ganos P.O. Box 412 Carmel Valley, California 93924-0412 (831) 624-3317 W (831) 659-3797 H