Financial Services Litigation Bulletin-February 2010
SEC Approves New Rule Amendments Designed to Protect Client Assets Held by Investment Advisers
The Securities and Exchange Commission ("SEC") has acted to strengthen controls over client assets held by registered investment advisers ("RIAs") or their affiliates. Specifically, on December 16, 2009, the SEC acted at an open meeting to adopt rule amendments to Rule 206(4)-2, commonly referred to as the Custody Rule, under the Investment Advisers Act of 1940 (the "Advisers Act") as well as related amendments to Form ADV Part 1 and Rule 204-2 with respect to recordkeeping. The amendments were motivated by a surge of SEC enforcement actions in 2009 against several RIA's and broker-dealers alleging fraudulent conduct, including misappropriation or other misuse of investor assets, many arising out of ponzi scheme activity.
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