SEC Proposes Amendments to Adviser Custody Rule and Related Forms
Publication Date: May 26, 2009
In a release dated May 20, 2009 (the "Release"), the Securities and Exchange Commission ("SEC") proposed amendments to Rule 206(4)-2 (the "Custody Rule") under the Investment Advisers Act of 1940 (the "Advisers Act"), and related forms, which are designed to provide additional safeguards under the Advisers Act when an adviser has custody of client funds or securities. The amendments would, among other things, require registered investment advisers 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. In addition, unless client accounts are maintained by an independent qualified custodian (i.e., a custodian other than the adviser or a related person), the adviser or related person would be required to obtain a written report from an independent public accountant that includes an opinion regarding the qualified custodian's controls relating to the custody of client assets. Finally, the amendments would provide the SEC with better information about the custodial practices of registered investment advisers.
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