The Securities and Exchange Commission announced (Release No. IA-2876) that it is proposing amendments to Rule 206(4)-2, the custody rule under the Investment Advisers Act of 1940.
The amendments, among other things, would require registered investment advisors that have custody of client funds or securities to undergo an annual surprise examination by an independent public accountant to verify client funds and securities.
This audit requirement would also include advisors that withdraw their management fee from client accounts held with a qualified custodian. In addition, unless client accounts are maintained by an independent qualified custodian (i.e., a custodian other than the advisor or a related person), the advisor or related person must obtain a written report from an independent public accountant that includes an opinion regarding the qualified custodian’s controls relating to custody of client assets. The comment period for this proposal ended on July 28, 2009.
We will monitor the outcome, as this will affect many clients in our Compliance Partners program. If you have questions, please do not hesitate to contact your account manager at 603-434-3594.
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