Notice2022-16848
Submission for OMB Review; Comment Request: Extension: Rule 206(4)-2
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 5, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 150 (Friday, August 5, 2022)</title>
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[Federal Register Volume 87, Number 150 (Friday, August 5, 2022)]
[Notices]
[Pages 48049-48050]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-16848]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-217, OMB Control No. 3235-0241]
Submission for OMB Review; Comment Request: Extension: Rule
206(4)-2
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
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'') has submitted to the Office of Management
and Budget (``OMB'') a request for extension and revision of the
previously approved collection of information discussed below.
The title for the collection of information is ``Rule 206(4)-2
under the Investment Advisers Act of 1940--Custody of Funds or
Securities of Clients by Investment Advisers.'' 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 at least quarterly,
identifying the amount of funds and of each security in the account at
the end of the period and setting forth all transactions in the account
during that period.\4\ The client funds and securities of which an
adviser has custody must 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.\5\
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 written 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'').\6\
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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).
\5\ Rule 206(4)-2(a)(4).
\6\ 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.\7\ The rule also provides an exception to the surprise
examination requirement for advisers that have custody solely because
they have authority to deduct advisory fees from client accounts,\8\
and advisers that have custody solely because a related person holds
the adviser's client assets (or has any authority to obtain possession
of them) and the related person is operationally independent of the
adviser.\9\
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\7\ Rule 206(4)-2(b)(4).
\8\ Rule 206(4)-2(b)(3).
\9\ Rule 206(4)-2(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 these collections 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 8,057 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 0.00524 hour per response. The annual aggregate burden for all
respondents to the requirements of rule 206(4)-2 is estimated to be
288,202 hours.
This collection of information is found at 17 CFR 275.206(4)-2 and
is mandatory. Responses to the collection of information are not kept
confidential. Commission-registered investment advisers are required to
maintain and preserve certain information required under rule 206(4)-2
for five years. The long-term retention of these records is necessary
for the Commission's examination program to ascertain compliance with
the Investment Advisers Act.
The estimated average burden hours are made solely for the purposes
of Paperwork Reduction Act and are not derived from a comprehensive or
even representative survey or study of the cost of Commission rules and
forms. An
[[Page 48050]]
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid control number.
The public may view background documentation for this information
collection at the following website: <a href="http://www.reginfo.gov">www.reginfo.gov</a>. Find this
particular information collection by selecting ``Currently under 30-day
Review--Open for Public Comments'' or by using the search function.
Written comments and recommendations for the proposed information
collection should be sent within 30 days of publication of this notice
by September 6, 2022.
To (i) <a href="/cdn-cgi/l/email-protection#da979882f4959798f49593889bf4899f9985bebfa9b185b5bcbcb3b9bfa89ab5b7b8f4bfb5aaf4bdb5ac"><span class="__cf_email__" data-cfemail="327f706a1c7d7f701c7d7b60731c6177716d565741596d5d54545b515740725d5f501c575d421c555d44">[email protected]</span></a> and (ii) David
Bottom, Director/Chief Information Officer, Securities and Exchange
Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549,
or by sending an email to: <a href="/cdn-cgi/l/email-protection#36666477697b575f5a54594e7645535518515940"><span class="__cf_email__" data-cfemail="9cccceddc3d1fdf5f0fef3e4dceff9ffb2fbf3ea">[email protected]</span></a>.
Date: August 1, 2022.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-16848 Filed 8-4-22; 8:45 am]
BILLING CODE 8011-01-P
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