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SEC Proposes to Further Strengthen Safeguards of Investor Funds

West Palm Beach (HedgeCo.net) – The SEC has proposed rule amendments to substantially increase protections for investors who entrust their money to investment advisers, hedge funds and FoHF’s.

The SEC is seeking public comment on the proposed measures, which are intended to ensure that investment advisers who have “custody” of clients’ funds and securities are handling those assets properly, investment law firm, Pillsbury Winthrop Shaw Pittman LLP, said.

“These new safeguards are designed to decrease the likelihood that an investment adviser could misappropriate a client’s assets and go undetected,” SEC Chairman Mary Schapiro said, “That’s because an independent public accountant will be looking over their shoulder on at least an annual basis.”

The additional safeguards proposed by the SEC include a yearly “surprise exam” of investment advisers performed by an independent public accountant to verify client assets. In addition, when an adviser or an affiliate directly holds client assets, a custody control review would have to be conducted by a PCAOB-registered and inspected accountant.

The SEC’s proposed rule amendments, if adopted, would promote independent custody and enable independent public accountants to act as third-party monitors.

Public comments on today’s proposed rule amendments must be received by the Commission within 60 days after their publication in the Federal Register. The full text of the proposed rule amendments will be posted to the SEC Web site soon, the law firm said.

Alex Akesson

Editor for HedgeCo.Net
Email: alex@hedgeco.net

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