Thursday, May 14, 2009

S.E.C. Plans Surprise Exams of Investment Advisers

The Commission voted 5-0 to open the proposal to public comment for 60 days, AP reports. S.E.C. chairwoman Schapiro said this is a response to Madoff and other schemes where View Video investment managers controlled client money directly or through affiliates, giving them power to withdraw it.

Annual surprise examinations would allow independent accountants to peer into a fund’s books and verify that the money is actually there providing ”another set of eyes on client assets,” Schapiro said. Fund managers would know an exam was coming every year, not when. For investment funds not using independent firms to hold client assets, proposal would require the investment adviser to obtain a report by a registered public accounting firm.

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