SEC to Contact Clients to Verify Assets
In a recent letter to the Managed Funds Association, Gene Gohlke, Associate Director of the Office of Compliance Inspections and Examinations, asked the MFA to notify its members that the SEC would request independent confirmation of investor assets from third-parties as a routine component of adviser exams. Mr. Gohlke indicated that the OCIE staff may contact investors, custodians, administrators, and auditors. Mr. Gohlke indicated that the staff would request confirmation of cash and securities held and a reconciliation from investors as well as a ensuring that transactions were authorized. Mr. Gohlke said that such requests should “not be construed as a reflection on the adviser or that any violation of the law has occurred.”
OUR TAKE: Advisers anticipating an SEC exam should tell clients up-front that they may hear from the SEC as a part of a routine request. Otherwise, we could envision panicked clients heading for the exits.