Subject: File No. S7-39-04
From: Steven K McGinnis
Affiliation: LWI Financial, Inc.

January 21, 2005

Thank you for reopening the comment period for the proposed rule changes in File Number S7-25-99. On behalf of the LWI Financial, Inc., a registered investment advisor and Loring Ward Securities, Inc., an NASD member firm, we urge the Commission to reject the proposal to exclude financial advisors who receive transaction commissions from the registration requirements of the Investment Advisors Act of 1940 IA Act and the protection of their customers afforded from that Act.

To permit securities salesmen to hold themselves out as financial advisors without the registration requirements of fee-only advisors creates an unequal and unfair advantage for those who do not have to meet the requirements of the IA Act and ERISA. The cost of doing business as an investment advisor is increased substantially by requirements such as fidelity bonding and auditing and the higher degree of care registered investment advisors must take because of their statutory fiduciary obligations.

This proposal will likely result in customers suffering unnecessary commission expenses. Sometimes the best advice is to do nothing and hold ones position. Too often customers do not understand the difference between those who provide investment advice for a fee and stockbrokers who are soliciting investment transactions. Under the current state of Federal law, those individuals who hold themselves out as investment advisors are regulated by the Commission and must deliver significant disclosure in Form ADV, Part II concerning the methods they employ to advise clients. Unregistered investment advisors who derive their income from the transactions effected will have an undisclosed conflict of interest that will not be cured by disclosure and may leave their clients, particularly the least sophisticated clients, without the ability to judge their investment methods, philosophy and experience.

For these reasons we respectfully request that the proposed rule not be adopted.