SEC warns investors that advisers could be mishandling assets

Agency says recent examinations found custody-related problems in one-third of firms reviewed

Mar 4, 2013 @ 4:12 pm

By Mark Schoeff Jr.

SEC, custody, advisers, alert, investors
+ Zoom

The Securities and Exchange Commission on Monday warned that it has found “significant deficiencies” in the way that investment advisers are handling the custody of client assets.

In an investor alert, the agency said that in recent examinations, custody-related problems were identified in one-third of the firms reviewed, or about 140 firms. Advisers have failed to recognize that they maintain control of their clients' assets, mixed together client, proprietary and employee assets in a single account and fallen short of surprise-exam requirements.

Advisers cited by the SEC have had to change their custody compliance policies and procedures, modify their business practices or devote more resources to custody issues. In some cases, the examiner has referred the incident to the SEC's Division of Enforcement.

“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,” SEC Chairman Elisse Walter said in a statement.

In the same news release, Carlo di Florio, director of the SEC's Office of Compliance Inspections and Examinations said: “We take deficiencies in this area very seriously and want to put advisers on alert about the importance of complying with the custody rule. It is a key component of our investment adviser examination program.”

Most investment advisers house their clients' assets with a third-party custodian such as Charles Schwab & Co. or TD Ameritrade Inc. The $65 billion Ponzi scheme perpetrated by Bernard Madoff in part revolved around the fact that Mr. Madoff's firm maintained custody of his clients' money.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

3 themes shaping your business now

If there are three overriding themes for advisers right now its succession planning, acquisition and hiring millennials. Financial adviser James Loftin discusses how his firm is tackling all three.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

Another thousand Dow points higher, and investors yawn

Market milestones keep falling like dominoes, with 51 records broken so far this year.

LPL retains $570 million with super-OSJ deal

Kansas-based nVision Wealth will come under supervision of Chicago-based IHT Wealth Management.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print