The SEC will require many money managers to hire independent public accountants to conduct annual “surprise exams” to ensure the security of client assets under a new rule the agency approved today.
Also, some money managers will have to have their custodial arrangements for client assets reviewed annually by public accountants that are certified by the Public Company Accounting Oversight Board.
Money managers that have physical custody of client assets — or have those assets with custodians closely affiliated with the manager — would be subject to both the surprise exams and annual reviews.
Arrangements in which the assets are held by a completely independent custodian are subject only to the custodial reviews, while arrangements in which the money manager has authority to withdraw assets from a custodian are subject only to the surprise inspection.
In a statement, Mary Schapiro, SEC chairwoman, said the new rule also would require auditors of managers to hedge funds and other private funds to register and be “subject to regular inspection by the PCAOB.”
In another rule approved by the SEC today, publicly traded companies will have to disclose in their proxy materials company compensation practices that could have an adverse impact on the company's value.
Proxy materials would also have to include additional information about company directors and nominees for director, including how their experience led a company's board to an appointment. Still another provision would require proxy disclosure of fees paid to compensation consultants.