81 FR 540 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 3 (January 6, 2016)

[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)]
[Notices]
[Pages 540-541]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-33211]


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SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736.

Extension: Rule 206(4)-2.
    OMB Control No. 3235-0241, SEC File No. 270-217.

    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, 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 
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 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 5,228 advisers would be subject 
to the information collection burden under the 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 0.02286 hour per response. The annual aggregate burden 
for all respondents to the requirements of rule 206(4)-2 is estimated 
to be 816,285 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 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 the background documentation for this 
information collection at the following Web site, www.reginfo.gov. 
Comments should be directed to: (i) Desk Officer for the

[[Page 541]]

Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10102, New 
Executive Office Building, Washington, DC 20503, or by sending an email 
to: [email protected]; and (ii) Pamela Dyson, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email 
to: [email protected]. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: December 30, 2015.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-33211 Filed 1-5-16; 8:45 am]
 BILLING CODE 8011-01-P