[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2610-2611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01376]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Extension:
Rule 206(4)-2, SEC File No. 270-217, OMB Control No. 3235-0241
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
collection of information to the Office of Management and Budget
(``OMB'') for extension and approval.
Rule 206(4)-2 (17 CFR 275.206(4)-2) under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.) governs the custody of funds or
securities of clients by Commission-registered investment advisers.
Rule 206(4)-2 requires each registered investment adviser that has
custody of client funds or securities to maintain those client funds or
securities with a broker-dealer, bank or other ``qualified custodian.''
\1\ The rule requires the adviser to promptly notify clients as to the
place and manner of custody, after opening an account for the client
and following any changes.\2\ If an adviser sends account statements to
its clients, it must insert a legend in the notice and in subsequent
account statements sent to those clients urging them to compare the
account statements from the custodian with those from the adviser.\3\
The adviser also must have a reasonable basis, after due inquiry, for
believing that the qualified custodian maintaining client funds and
securities sends account statements directly to the advisory clients,
and undergo an annual surprise examination by an independent public
accountant to verify client assets pursuant to a written agreement with
the accountant that specifies certain duties.\4\ Unless client assets
are maintained by an independent custodian (i.e., a custodian that is
not the adviser itself or a related person), the adviser also is
required to obtain or receive a report of the internal controls
relating to the custody of those assets
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from an independent public accountant that is registered with and
subject to regular inspection by the Public Company Accounting
Oversight Board (``PCAOB'').\5\
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\1\ Rule 206(4)-2(a)(1).
\2\ Rule 206(4)-2(a)(2).
\3\ Rule 206(4)-2(a)(2).
\4\ Rule 206(4)-2(a)(3), (4).
\5\ Rule 206(4)-2(a)(6).
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The rule exempts advisers from the rule with respect to clients
that are registered investment companies. Advisers to limited
partnerships, limited liability companies and other pooled investment
vehicles are excepted from the account statement delivery and deemed to
comply with the annual surprise examination requirement if the limited
partnerships, limited liability companies or pooled investment vehicles
are subject to annual audit by an independent public accountant
registered with, and subject to regular inspection by the PCAOB, and
the audited financial statements are distributed to investors in the
pools.\6\ The rule also provides an exception to the surprise
examination requirement for advisers that have custody because they
have authority to deduct advisory fees from client accounts and
advisers that have custody solely because a related person holds the
adviser's client assets and the related person is operationally
independent of the adviser.\7\
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\6\ Rule 206(4)-2(b)(4).
\7\ Rule 206(4)-2(b)(3), (b)(6).
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Advisory clients use this information to confirm proper handling of
their accounts. The Commission's staff uses the information obtained
through this collection in its enforcement, regulatory and examination
programs. Without the information collected under the rule, the
Commission would be less efficient and effective in its programs and
clients would not have information valuable for monitoring an adviser's
handling of their accounts.
The respondents to this information collection are investment
advisers registered with the Commission and have custody of clients'
funds or securities. We estimate that 7,216 advisers would be subject
to the information collection burden under rule 206(4)-2. The number of
responses under rule 206(4)-2 will vary considerably depending on the
number of clients for which an adviser has custody of funds or
securities, and the number of investors in pooled investment vehicles
that the adviser manages. It is estimated that the average number of
responses annually for each respondent would be 6,830, and an average
time of 0.00500 hour per response. The annual aggregate burden for all
respondents to the requirements of rule 206(4)-2 is estimated to be
246,532 hours.
The estimated average burden hours are made solely for purposes of
the Paperwork Reduction Act and are not derived from a comprehensive or
even representative survey or study of the cost of Commission rules and
forms.
Written comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information shall
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the proposed collection of information; (c) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
Consideration will be given to comments and suggestions submitted in
writing within 60 days of this publication.
Please direct your written comments to Charles Riddle, Acting Chief
Information Officer, Securities and Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington, DC 20549; or send an email to:
[email protected].
Dated: February 1, 2019.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01376 Filed 2-6-19; 8:45 am]
BILLING CODE 8011-01-P