Jennifer Wray CPA PLLC provides Surprise Custody Examination for the registered investment advisers who have custody per Rule 206(4)-2 under the Investment Advisers Act of 1940 (the”Act”).
The advisers are deemed to have custody of client assets that are held directly or indirectly by a related person in connection with advisory services provided by the adviser to its clients. If RIA
- Has custody of clients’ cash, bank accounts, or securities
- Ability to withdraw or access to client funds or securities,
- Act as a general partner of LP or manager of LLC
- trustee or a fiduciary of an account
- Serves under a power of attorney for a client
The registered advisers with custody of client assets are required an annual surprise examination of those assets by an independent public accountant registered with PCAOB. these requirements do not apply to advisers who have custody solely because they are authorized to deduct fees from client accounts. Nor is the annual surprise examination required of advisers to pooled investment vehicles that provide audited financial statements to investors.
Any adviser that is subject to the surprise
audit requirement must enter into a written agreement with the accountant
requiring it to:
(i) file a certificate on Form ADV-E within 120 days of the
date of the examination describing the nature and scope of the examination;
(ii) notify the SEC within one business day of any finding of material
discrepancies during the course of the examination;
and (iii) file Form ADV-E within four business days of its resignation or dismissal from the engagement or upon a voluntary or involuntary removal from consideration for reappointment, along with a narrative statement providing contact information and an explanation of any problems encountered that may have contributed to such termination.