The SEC is giving a heads up to investment advisors, saying it is now contacting clients and other third parties to verify client assets managed by the advisor.
In a letter to the Investment Adviser Association, Gene Gohlke, associate director of the SEC’s Office of Compliance Inspections and Examinations (OCIE), informs advisors of the new practice, saying “in order to perform a valid verification of assets, the staff must request independent confirmation of investor assets from various third-parties,” including clients, derivative counterparties, hedge fund investors, custodians, DTCC, and auditors. In these requests, exam staff will seek confirmation of cash and securities held by a sample of advisory clients as of a specific date and confirmation of transactions in such accounts over a period of time.