Investment Advisers Get Rule Extension for Secure Client Funds
Published Date: 8/1/2025
Notice
Summary
The SEC is asking to keep and update a rule that helps protect people’s money when investment advisers hold it. Advisers must keep client funds with trusted banks or brokers, tell clients where their money is, and get surprise audits every year. This keeps things safe and transparent, with no new costs or deadlines for advisers right now.
Analyzed Economic Effects
3 provisions identified: 1 benefits, 1 costs, 1 mixed.
Stronger protections for investor custody
If you have money with a registered investment adviser, the rule says your adviser must keep your funds or securities with a qualified custodian (a bank, broker-dealer, or other qualified custodian), tell you where and how your assets are held, and ensure the custodian sends you account statements at least quarterly. Advisers who send their own statements must include a legend urging you to compare the adviser’s statements with the custodian’s statements.
Annual surprise audits and recordkeeping burden
Registered investment advisers with custody must have an annual surprise examination by an independent public accountant and, in some cases, obtain a written report on internal controls from a PCAOB-registered accountant. The SEC estimates 9,210 advisers are subject to this information collection, with an average of 3,639 responses per adviser, 0.009426547 hours per response, and an annual aggregate burden of 315,925 hours; advisers must keep required records for five years.
Who is exempt from surprise exam requirement
Certain clients and situations are excluded from the surprise examination requirement: registered investment companies; pooled investment vehicles (e.g., limited partnerships or LLCs) that undergo an annual PCAOB-registered audit and distribute audited financial statements to investors; advisers with custody only because they deduct advisory fees; and advisers whose custody arises solely because a related person holds assets and that related person is operationally independent.
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