[Federal Register Volume 77, Number 167 (Tuesday, August 28, 2012)]
[Notices]
[Pages 52074-52075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21115]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213
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 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
[[Page 52075]]
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 4,763 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 0.01593hour per response. The
annual aggregate burden for all respondents to the requirements of
rule 206(4)-2 is estimated to be 518,275 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 Thomas Bayer, Director/
Chief Information Officer, Securities and Exchange Commission, c/o
Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or
send an email to: [email protected].
Dated: August 22, 2012.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21115 Filed 8-27-12; 8:45 am]
BILLING CODE 8011-01-P