Quite an accolade!
Many thanks to Julie Steinberg of the Bull & Bear Report/ FINS "Where Compliance Pros Connect Online" (March 26, 2010) http://www.fins.com/Finance/Articles/SB126954368805367487/Where-Compliance-Pros-Connect-Online?Type=0&idx=1 for ranking the BrokeAndBroker Blog among the top three in the industry:
-- BrokeandBroker, a blog run by Bill Singer, a high-profile securities attorney who represents whistleblowers, broker-dealers and investors.
-- Corporate Compliance Insights offers a job board, articles and a forum for pressing compliance matters. It's from Conselium, an executive-search firm focusing on corporate compliance, audit and information-technology security.
-- Compliance Oversights is maintained by Rosenthal, the owner of the Broker Dealer, Investment Advisor Compliance Officers LinkedIn group. Rosenthal, a former compliance officer-turned-recruiter, gives a recruiter's perspective on compliance hiring.
About FINS: FINS.com is a new career site from the world's leading business publication, The Wall Street Journal. Focused solely on the finance market, FINS is a daily online career resource for finance professionals, combining great jobs with industry news, company profiles and career advice. The site covers all major financial sectors including accounting, insurance, wealth management, sales and trading and more. FINS reaches one of the most coveted financial audiences in the market and allows companies to target top financial professionals across 15 sectors. FINS provides custom hiring solutions across The Wall Street Journal Digital Network including targeted media outreach, candidate search, and job postings.
New rules are in effect for investment advisers registered with the Securities and Exchange Commission that have custody of advisory clients' funds or securities. These new rules are designed to provide additional safeguards for investors against the possibility of theft or misappropriation by SEC-registered investment advisers. Investors still have an important role to play, however, in helping to ensure the safety of their investments.
Custody by investment advisers means holding client funds or securities, directly or indirectly, or having the authority to obtain possession of them. For example, advisers have custody where the adviser has possession of client funds and securities or has power of attorney to sign checks on a client's behalf, to withdraw funds or securities from the client's account, including fees, or to otherwise dispose of a client's assets for any purpose other than authorized trading.
The amended rule imposes a number of requirements on SEC-registered investment advisers to protect client funds and securities over which the adviser has custody.
First, subject to certain limited exceptions, an investment adviser is required to maintain client funds and securities with a qualified custodian. A qualified custodian either maintains client funds and securities in a separate account for each client under that client's name, or in accounts that contain only client funds and securities under the name of the investment adviser as agent or trustee for the clients. Qualified custodians can be banks, registered broker-dealers, futures commission merchants or certain foreign entities.
Second, if the adviser opens the custodial account, it must notify clients in writing of the qualified custodian's name, address, and the manner in which the funds or securities are maintained, promptly when the account is opened and following any changes to this information. Also, in any account statement sent by the adviser, the adviser must advise their clients to compare account statements sent by the adviser with the account statements sent by the custodian.
Third, advisers must have a reasonable basis to believe that the qualified custodians that maintain client funds and securities send account statements at least quarterly directly to the adviser's clients. This permits advisory clients to compare the statements they receive from the custodian with any statements or other information they receive from their adviser and to determine whether account transactions, including deductions to pay advisory fees, are proper.
Fourth, if the adviser has custody of client assets, it must enter into a written agreement with an independent public accountant to examine those assets on a surprise basis every year. The accountant performing the "surprise" examination will contact some, or all, advisory clients to confirm their holdings with those on the records of the adviser. An adviser that only has custody because it has the authority to deduct advisory fees from client accounts is not required to obtain a surprise examination.
Fifth, if the custodian is the adviser or is affiliated with the adviser in some way, the adviser must, among other things, obtain a report from the related qualified custodian that includes an opinion of an independent public accountant on the effectiveness of the custodian's procedures for safeguarding client funds and securities every year.
The rule amendments are designed to enhance safeguards over client assets, but they are not a substitute for investor diligence and care. The very purpose of requiring custodians to send clients account statements at least quarterly is to make sure that clients have the information they need to review their holdings and monitor their investments.
In performing investor diligence and care, investors should consider the following:
Most clients establish their own custodial accounts, but advisers can open a custodial account for a client as well. If it is not clear when you set up your account with a registered investment adviser who will maintain custody of your assets, ask who has custody and how you can contact them.
If your investment adviser is registered with the Commission and you do not receive a separate statement directly from a qualified custodian such as a bank or broker-dealer, you should contact your adviser and custodian.
If you notice a discrepancy, you should contact both the adviser and the custodian, preferably the supervisor of your advisory or custodial representative or a compliance officer. If the discrepancy is not resolved to your satisfaction or you continue to have concerns, you should contact the SEC. If your adviser is registered with a state, rather than the SEC, please contact your state securities regulator. For contact information on state securities regulators, please click here.
Fees can have a material effect on your investment return. Ask your adviser about fees, including how the adviser's fees compare to other advisers. Always consider fees when making an investment decision.
The new custody rules are designed to provide additional safeguards for investors against possible theft or misappropriation by investment advisers. However, investors should always exercise care when making investment decisions and remain vigilant in monitoring their investments. For more information, please see the resources listed below.