SEC boss Mary Schapiro proposes advisers should bring in accountants to do
spot checks. This would guarantee client assets really exist after scandals like
the Bernard Madoff ponzi scheme fraud.
A second proposal would apply only to investment advisers whose client assets
are not held by a company independent of the adviser.
For those companies in the second category, Schapiro wants detailed written
reports drawn up by a firm. This would then have to be rubber-stamped by another
But what does this mean for accountants helping out subsidiaries of US
companies based in the UK?
The SEC will demand advisers publicly disclose the name of the accountant
conducting these reviews if the plans are endorsed. To ward another scandal, the
watchdog says it will want to know why an accountant was fired or stepped down.
This should all help highlight ‘red flags’ for regulators and investors.
The SEC has made it patently clear that the profession will be used as
‘Investment advisers are going to be required to be subject to a review that
results in a written report – prepared by a firm registered with and inspected
by the Public Accounting Oversight Board that, among other things, describes the
controls in place relating to custodial services, tests the operating
effectiveness of those controls and provides the results of those tests,’ it
It will mean an increased workload, counterbalanced by a lot of scrutiny,
which suggests the extra responsibility comes at a price.
David Jetuah is a reporter on Accountancy Age
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