Securities Law Prof Blog

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

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Monday, March 4, 2013

SEC Issues Alert on Investment Adviser's Custody Rule

The SEC  issued a Risk Alert on Significant Deficiencies Involving Adviser Custody and Safety of Client Assets.  It reports that the SEC's National Examination Program (NEP) "has observed widespread and varied non-compliance with elements of the custody rule," which is designed to protect advisory clients from the misuse or misappropriation of their funds and securities.  According to the Alert,

The custody-related deficiencies NEP staff observed can be grouped into four categories: failure by an adviser to recognize that it has “custody” as defined under the custody rule; failures to comply with the rule’s “surprise exam” requirement; failures to comply with the “qualified custodian” requirements; and failures to comply with the audit approach for pooled investment vehicles.

 

http://lawprofessors.typepad.com/securities/2013/03/sec-issues-alert-on-investment-advisers-custody-rule.html

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