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ARTICLE · 04 JUNE 2009

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

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The U.S. Securities and Exchange Commission (SEC) recently proposed rule amendments designed to increase protections for clients whose assets are being maintained by investment advisers.

United StatesFinance and Banking
Peter Fetzer
Peter Fetzer
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Non-Enforcement Matters

SEC Proposes Rule Amendments to Help Guard Against Misappropriation of Client Assets by Investment Advisers

The U.S. Securities and Exchange Commission (SEC) recently proposed rule amendments designed to increase protections for clients whose assets are being maintained by investment advisers. The proposed rule would require investment advisers who have "custody" of client assets to engage an independent public accountant to conduct an annual "surprise exam" of the investment adviser to verify client assets. Moreover, if the investment adviser (or an affiliate) holds a client's funds directly, an accountant would review the custody control measures as well. Custodians holding assets of investment adviser clients also would have increased responsibility under the new rule: They would be required to deliver their statements of client assets directly to the client (rather than delivering the statements through the investment adviser).

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