Registered Investment Advisor (RIA) Compliance

May 11, 2010 - PRLog -- Cutting Through the Custody Rule Confusion

This webinar will be offered at three different times on:

Thu, May 20, 2010 2:30 PM - 3:30 PM EDT
Tue, May 25, 2010 10:00 AM - 11:00 AM EDT
Tue, May 25, 2010 2:30 PM - 3:30 PM EDT

To register please visit http://www.goodmanco.com/companyinfo/news/detail.aspx?newsID=DCE9F375-5C22-41C4-9036-D5F97258D9C0

************************************************************

Registered Investment Advisors SEC Regulatory Changes - Understanding the New Surprise Audit and Internal Controls Requirement

Some investment professionals will now be required to comply with new SEC regulations related to investments. Specifically, these regulations affect advisors that have custody over investor assets (custody is broadly defined as holding client funds or securities directly or indirectly or having any authority to obtain possession of them).

Why have these regulations been put into practice?

In recent years, the actions of a few have forced an additional layer of protection to be imposed on all investment advisors that handle client assets. Whether or not you believe these regulations should be imposed is not the issue. These are mandated steps that some advisors must comply with to satisfy the SEC requirements.

There are two separate but related audit requirements.

You may need to comply with one or both elements of the regulation, or you may be completely exempt.

Surprise Audit - The surprise audit is intended to provide reasonable assurance that the assets exist and, in most cases, must be performed prior to December 31, 2010. The auditors are required to show up without advance notice and you will be required to let them begin their engagement when they arrive. This audit does not replace your need for a financial statement audit. It is a required, supplemental audit.

Potential Internal Controls Assurance Engagement - If required, this engagement must be conducted by September 12, 2010. Contact any Goodman & Company professional for the details on this requirement.

What kind of firm do you need to engage to assist with this new regulation?

If you are required to comply with this new regulation, you will need to engage an independent CPA firm. Independence rules are complicated and are far more stringent for firms that are subject to PCAOB inspection. Your financial statement audit firm may not be independent for purposes of conducting the surprise audit and internal controls assurance engagement. Why risk crossing independence lines and take a chance of having to redo efforts or be not be in compliance? We strongly recommend that you engage a PCAOB registered and inspected firm. Also, be aware that some firms are PCAOB registered, but not inspected, which may not satisfy the requirements.

How do you know if you need to comply with either or both of these items?

You will need to review your ADV report to determine if you need to comply with these regulations. If you answered yes to either questions 9A or 9B, then you will need to take action. If you have any doubts or believe you need to reconsider your answer to questions 9A or 9B on your ADV filing, you may contact Mitch Bean, Mike Stough or Meg Taylor to discuss your situation. Please note that waiting may restrict your options -- there are a limited number of PCAOB registered and inspected firms familiar with the registered investment advisory profession and their audit schedules will begin to fill.

# # #

Goodman Solutions provides a full range of financial and accounting resource services to major public companies and large organizations on a permanent or project basis.