SEC Will Consider at May 14 Meeting Whether to Propose Amendments to Rule 206(4)-2 Requiring Audits of Investment Advisers with Custody

May 13, 2009

The Securities and Exchange Commission (“SEC”) has announced that the Commission will consider whether to propose amendments to Rule 206(4)-2 under the Investment Advisers Act of 1940 during its open meeting scheduled for Thursday, May 14, 2009.

The agenda posted for this SEC open meeting explains that “[t]he proposed amendments would enhance the protections provided advisory clients when they entrust their funds and securities to an investment adviser. If adopted, the amendments would require investment advisers having custody of client funds and securities to obtain a surprise examination by an independent public accountant, and, unless the client assets are maintained with an independent custodian, obtain a review of custodial controls from an independent public accountant.”

There is no reference in the posted agenda to the previously discussed requirement of a third-party compliance audit of the registered investment adviser or a requirement that a registered investment adviser’s senior executive certify annually the adequacy of the investment adviser’s internal controls. Of particular interest to many registered investment advisers is whether any proposed audit requirement for registered investment advisers will apply to those registered investment advisers that have custody solely due to automatic fee-deduction.

Following the SEC’s open meeting on May 14, 2009, RIA Compliance Consultants will provide readers with more details of any proposed amendments to the custody rules for registered investment advisers.

Posted by Bryan Hill
Labels: Custody, SEC, Third-Party Compliance Audit