SEC Proposes Amendments To Investment Advisers Act

On May 20, 2009, the United States Securities and Exchange Commission ("Commission" or "SEC") issued Release No. IA-2876, proposing certain amendments to the Investment Advisers Act of 1940 ("Advisers Act"). These proposed amendments, among other things, would require registered investment advisers ("RIAs") who maintain custody of client funds or securities to undergo an annual surprise examination by an independent public accountant. This independent public accountant would be required to verify client funds and securities, and issue a written report to the RIA opining upon whether the controls in place for the custody of client assets are satisfactory. The SEC believes these amendments would provide the Commission with better information about RIAs' custodial practices, and provide additional safeguards under the Advisers Act when an adviser (or its affiliates) has custody of client funds or securities. These proposed requirements are an obvious outgrowth of the