July 3, 2015


July 03, 2015

July 02, 2015

July 01, 2015

SEC (Securities and Exchange Commission) Risk Alert Identifies Common Adviser Custody Rule Deficiencies

On March 14, the Office of Compliance Inspections and Examinations of the Securities and Exchange Commission released a National Exam Program Risk Alert (Risk Alert). The Risk Alert discussed common deficiencies in respect of Rule 206(4)-2 under the Investment Advisers Act of 1940 (Custody Rule) that were reported by SEC staff in conducting investment adviser examinations.

In the Risk Alert, the SEC identified four primary categories of deficiencies:

•Failure by an adviser to recognize situations in which it has custody under the Custody Rule;

•Failure to meet the Custody Rule’s surprise examination requirements;

•Failure to satisfy certain “qualified custodian” requirements under the Custody Rule; and

•Failure to properly engage independent auditors or otherwise comply with the requirements for audits

of pooled investment vehicles under the Custody Rule.

For additional details regarding the nature of the deficiencies commonly identified and SEC guidance on compliance with the Custody Rule, the Risk Alert may be found here.

©2015 Katten Muchin Rosenman LLP


About this Author

Peter J. Shea, Financial Insituations, Katten Muchin Law firm

Peter J. Shea is a partner in Katten’s Financial Services practice. His clients range from NYSE-listed exchange traded funds to small private businesses as well as registered investment companies, hedge funds, investment advisors, broker-dealers and other financial institutions.

Gregory E. Xethalis, katten muchin law firm, financial institutions attorney

Gregory E. Xethalis concentrates his practice in financial services matters, especially in the exchange-traded investment company (ETF) and exchange-traded commodities (ETC) practice.