Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, December 31, 2009

SEC Adopts Custody and Recordkeeping Rules for Investment Advisers

The SEC adopted amendments to the custody and recordkeeping rules under the Investment Advisers Act of 1940 to provide additional safeguards when a registered adviser has custody of client funds or securities.  The final rules require the adviser, among other things: to undergo an annual surprise examination by an independent public accountant to verify client assets; to have the qualified custodian maintaining client funds and securities send account statements directly to the advisory clients; and unless client assets are maintained by an independent custodian (i.e., a custodian that is not the adviser itself or a related person), to obtain, or receive from a related person, a report of the internal controls relating to the custody of those assets from an independent public accountant that is registered with and subject to regular inspection by the Public Company Accounting Oversight Board. Finally, the amended custody rule and forms will provide the Commission and the public with better information about the custodial practices of registered investment advisers.  The rules go into effect 60 days after publication in the Federal Register.

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