Securities and Exchange Commission Chairman Mary Schapiro is reportedly backing away from possible proposed changes to the SEC custody rule in light of the Madoff scandal, including third-party compliance audits of large advisory firms.
The Financial Planning Association cites “unofficial reports” from the commission on its Web site, saying “the SEC is dropping the third-party compliance audit for the time being. Citing the SEC’s limited resources, the Chairman had said one approach might be to impose independent audits on large firms, for those firms holding custody of client assets, and require a senior officer from each firm to attest to the sufficiency of the controls they have in place. The list of certifying firms would be publicly available on the SEC’s Web site so that investors could check on their own financial intermediary, and the name of any auditor of the firm would be listed. The SEC is still working on proposals for auditing advisers with custody and for requiring the officer attestation.”