New surprise examination requirement for RIAs are in effect. Many Registered Investment Advisors are affected by this and need to take action to comply. We have been keeping clients updated on this, as well as the amended Custody Rule.
Some firms are attempting to side step the custody rules for Trustee accounts by appointing a designated individual within the firm as Trustee and positioning that individual as having custody, not their firm. The SEC guidelines on this are clear. This is not a valid position for third party Trustee accounts. HLB Gross Collins, P.C. strongly recommends Registered Investment Advisory firms seek counsel from their compliance consultant on such matters.
“A firm that has custody only has to file form ADV-E like we have in the past.” While this is true to the extent that firms will continue to file form E, that form must also be accompanied by an accounts letter from an independent CPA firm evidencing that a surprise examination was performed and that a clean opinion was given for the examination.