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ARTICLE · 10 MARCH 2013

SEC Adviser Examinations Focus On Custody Rule Compliance

Ropes & Gray LLP
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The SEC’s Office of Compliance Inspections and Examinations ("OCIE") found that approximately one-third of recent examinations that identified significant deficiencies involved custody-related issues.

United StatesFinance and Banking
Ropes & Gray LLP'S Investment Management Practice Group
Ropes & Gray LLP'S Investment Management Practice Group
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Ropes & Gray LLP'S Hedge Fund Practice Group
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Ropes & Gray LLP'S Private Investment Funds
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The SEC's Office of Compliance Inspections and Examinations ("OCIE") found that approximately one-third of recent examinations that identified significant deficiencies involved custody-related issues. To signal the high level of concern that OCIE attaches to custody of client assets, OCIE has issued a Risk Alert and an Investor Bulletin regarding compliance with Rule 206(4)-2 under the Investment Advisers Act of 1940 (the "Custody Rule"). The Risk Alert provides a summary of common exam deficiencies to help investment advisers comply with the Custody Rule and the Investor Bulletin is intended to inform investors of the need to be proactive ensuring the safety of their assets. While the Risk Alert provides little new guidance on the relative importance of different elements of the Custody Rule, it clearly indicates that OCIE is closely scrutinizing adviser compliance with the rule and expecting advisers to be in strict compliance with all of its technical requirements.

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