Investment Advisers: Requirements and Costs Associated with the Custody Rule

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By A. Nicole Clowers (au)
Year: 2013
Pages: 32
Binding Paperback
ISBN 978-1-4578-4822-3

Product Code: 1457848228

Description

Investment advisers provide a wide range of services and collectively manage around $54 trillion in assets for around 24 million clients. Unlike banks and broker-dealers, investment advisers typically do not maintain physical custody of client assets. However, under federal securities regulations, advisers may be deemed to have custody because of their authority to access client assets, for ex., by deducting advisory fees from a client account. High-profile fraud cases in recent years highlighted the risks faced by investors when an adviser has custody of their assets. In response, the Securities and Exchange Comm. (SEC) amended its custody rule in 2009 to require a broader range of advisers to undergo annual surprise examinations by independent accountants. SEC also provided relief from this requirement to certain advisers, including those deemed to have custody solely because of their use of related but äóìoperationally independentäó custodians. This report describes (1) the requirements of and costs associated with the custody rule; and (2) SECäó»s rationale for not requiring advisers using related but operationally independent custodians to undergo surprise examinations. Figures. This is a print on demand report.

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