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News April 27, 2015 Issue

Custody Exam/Audit May Not Be Required When Adviser and Client Are the Same

It may seem a bit odd for advisory firms to arrange surprise independent verification exams of funds in principal accounts. Now they may no longer have to. The SEC staff, in a March 23 no-action letter, told an advisory firm that it would not recommend enforcement action against it for violating Rule 206(4)-2, the Custody Rule, if the firm does not comply with the Rule’s independent verification and account statement delivery provisions.

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