Indiana Securities Commissioner Provides Relief to Investment Advisers from an Annual Surprise Verification Custody Audit Due to Standing Letter of Authorizations

October 22, 2018

The Indiana Securities Commissioner recently published a new Statement of Policy regarding custody requirements for investment adviser firms registered in Indiana.

The new policy provides relief to Indiana state registered investment adviser from being required to obtain an annual surprise verification audit (due to the custody rule) as a result of a standing letter of authorization (“SLOA”) which gives the investment adviser firm authority to transfer client funds from a qualified custodian to a 3rd party. The Indiana Securities Commissioner announced the Indiana Securities Division would be taking a position similar to that detailed in the  U.S. Securities and Exchange Commission (“SEC”) staff’s no-action letter to the Investment Advisers Association in February 2017 regarding 3rd party SLOAs. In its statement, the Indiana Securities Division laid out 9 conditions an investment adviser firm must meet if the investment adviser firm has a 3rd party SLOA and wish to be exempt from having to obtain an annual surprise verification audit.  This Indiana Securities Division’s Statement of Policy is also available to our Annual Compliance Program clients via the online subscription account.

RIA Compliance Consultants also has a sample spreadsheet, Custody – SLOA Transfer to 3rd Party – Spreadsheet Documenting Requirements, which is intended to help an investment adviser firm document that each SLOA to transfer an investment advisory client’s funds to a third-party meets the SEC’s custody guidance.  This sample spreadsheet is available to our Annual Compliance Program clients in the Value, Bronze, Silver, Gold and Platinum packages, which can be accessed from our website here, or can be purchased a la carte for $85 by clicking here.

Posted by Grant Parr
Labels: Custody, Indiana Securities Division