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ARTICLE · 02 APRIL 2009

A Compilation Of Enforcement And Non-Enforcement Actions - March 2009

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On March 6, 2009, the Investment Adviser Association (IAA) sent a letter to U.S. Securities and Exchange Commission (SEC) Chair Mary Schapiro, asking the SEC to tighten the exemptions for self-custody under Rule 206(4)-2 (the Custody Rule) promulgated pursuant to the Investment Advisers Act of 1940 (Advisers Act).

United StatesFinance and Banking
Peter Fetzer
Peter Fetzer
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Non-Enforcement

IAA Wants SEC to Review Custody Rule

On March 6, 2009, the Investment Adviser Association (IAA) sent a letter to U.S. Securities and Exchange Commission (SEC) Chair Mary Schapiro, asking the SEC to tighten the exemptions for self-custody under Rule 206(4)-2 (the Custody Rule) promulgated pursuant to the Investment Advisers Act of 1940 (Advisers Act). Under the Custody Rule, advisers may hold client assets with an affiliated broker-dealer, so long as the adviser complies with certain requirements.

The IAA requested that the SEC prohibit self-custody unless firms separate custodial duties from advisory duties. The IAA also proposed a requirement for an independent third-party review to ensure that a firm's internal controls are sufficient to prevent the kind of fraud that might arise when affiliated custodians control clients' investments. In addition, the IAA requested that the SEC modify Part 1 of Form ADV to require advisers to disclose whether

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