Be Prepared for a Surprise Custody Examination
The custody rule requires an adviser that has custody of client assets to maintain those assets with a "qualified custodian", and to have a reasonable basis for believing the custodian sends quarterly account statements directly to the clients.
SEC Custody Rule Amendments
The SEC adopted amendments to the custody rule for Investment Adviser client fund or securities. These amendments were put in place to protect clients and add additional safeguards under the Advisers Act. Please download our Surprise Custody Audit Brochure (PDF).
Annual Surprise Custody Examination / Audits
While their where a bevy of changes made in the SEC Custody Rule Amendments, below are a few of the main takeaways Investment Managers should be aware of regarding the amendments in view of SEC guidance.
Investment Managers should be aware of the following updates:
- Custodians are required to send directly to the investor’s quarterly account statements, and the Investment Advisers have a responsibility to ensure this is happening.
- Investment Advisers that have custody of their clients assets are required annually to complete a surprise custody audit by an independent public accounting firm, in order to verify the existence of Client’s assets
- The fund’s financial statements are required to be audited by an independent, Public Company Accounting Oversight Board (PCAOB) certified accounting firm, if the adviser relies on delivering audited financial statements to pool investors in order to satisfy the custody rule.
- Investment Adviser must acquire a report of the internal controls from their custodian, ensuring the clients assets are being properly managed and protected from errors and fraud.
Akram & Associates Is Your Trusted Adviser
Akram will assist you in determining if a surprise custody examination is required. If so, we will perform the examination efficiently, cost-effectively, and according to the Custody Rule's requirements. As a PCAOB registered accounting firm, we possess the expertise you need to meet your organization's ever-changing demands.
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Akram has earned a reputation of trust in the marketplace through offering customized service and senior-led involvement. Our partners have more than 20 years experience auditing investment industry clients.
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We understand that clients in the Alternative Investments arena are extremely prudent. At Akram, we provide high-end, tailored fund accounting services with careful planning and an unmatched responsiveness that only a boutique accounting firm like ours can deliver. Contact us today to learn more about our specialized assurance, advisory, and tax services for hedge funds, commodity trading advisors, private equity and venture capital funds, digital asset funds, insurance dedicated funds, real estate funds, day traders, investors, family offices, and high net worth individuals.