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The Securities and Exchange Commission (SEC) is warning investors that it has found “significant deficiencies” in the way in which investment advisers handle the custody of client assets.
The SEC issued an risk alert and investor bulletin on its exam findings yesterday in which the regulator said that one-third of the investment advisers who underwent government examinations had compliance problems with a key rule designed to protect clients from theft or misuse of their money. Among the advisers’ deficiencies cited by the SEC:
Some of the problems found by the SEC have been referred to the agency’s enforcement division for investigation.
“Because the safeguarding of assets is central to investor protection, it is critical that investment advisers follow our rules when they maintain custody of their clients’ funds,” said SEC Chairman Elisse B. Walter.
“We take deficiencies in this area very seriously and want to put advisers on alert about the importance of complying with the custody rule,” added OCIE Director Carlo V. di Florio. “It is a key component of our investment adviser examination program.”