On December 30, 2009, the SEC adopted amendments to the custody and recordkeeping rules under the Investment Advisers Act of 1940 and related forms. Below is a brief summary of these amendments. You may locate and review the entire SEC release concerning these amendments at the following link:
http://www.sec.gov/rules/final/2009/ia-2968.pdf
The amendments are designed to provide additional safeguards under the Advisers Act when a registered adviser has custody of client funds or securities by requiring such an adviser, among other things: to undergo an annual surprise examination by an independent public accountant to verify client assets; to have the qualified custodian maintaining client funds and securities send account statements directly to the advisory clients; and unless client assets are maintained by an independent custodian (i.e., a custodian that is not the adviser itself or a related person), to obtain, or receive from a related person, a report of the internal controls relating to the custody of those assets from an independent public accountant that is registered with and subject to regular inspection by the Public Company Accounting Oversight Board. Finally, the amended custody rule and forms will provide the Commission and the public with better information about the custodial practices of registered investment advisers.
Effective Date: March 12, 2010
Compliance Dates: An investment adviser required to obtain a surprise examination must enter into a written agreement with an independent public accountant that provides that the first examination will take place by December 31, 2010. An investment adviser also required to obtain or receive an internal control report because it or a related person maintains client assets as a qualified custodian must obtain or receive an internal control report within six months of the effective date. The full SEC release contains additional information on the effective and compliance dates.