Elevate is pleased to offer annual surprise exams as an additional service from our sister company, DeMarco Sciaccotta Wilkens & Lunleavy, LLC. More and more, RIA firms are required to comply with certain federal and state laws designed to protect investors from exposure to risk and fraud. One such law is the “Custody Rule” as outlined under Rule 206(4)-2 of the Investment Advisers Act of 1940 (Adviser’s Act). Established to protect advisory clients from the misuse or misappropriation of their funds and securities, this rule is of utmost importance.
Does the Custody Rule apply to you?
The Custody Rule requires RIAs with direct or indirect custody of client assets to have a PCAOB-registered independent accounting firm conduct an annual surprise exam. Examples of instances of custody include the following:
- You have the ability, including acting as trustee for your client, to withdraw or access your clients’ funds or securities
- You have log-in credentials to your client’s accounts and accessibility to withdraw funds.
What does an annual surprise exam involve?
The accountants at our sister PCAOB-registered accounting firm are highly trained in this specialized work. They work with a variety of RIA firms to complete this annual requirement. At a minimum, a surprise exam confirms accounts directly with clients and a respective custodian.
Is your firm subject to an annual surprise exam?
Not every RIA firm will require a surprise exam—along with your internal/external compliance expert we’ll help you determine if your firm must fulfill this requirement.