Rule 206(4)-2, Custody of
Funds or Securities of Clients by Investment Advisers
Extension without change of a currently approved collection
No
Regular
08/01/2025
Requested
Previously Approved
36 Months From Approved
10/31/2025
33,514,391
24,133,429
315,925
288,202
176,577,000
174,367,000
Rule 206(4)-2 under the Investment
Advisers Act of 1940 (17 CFR 275.206(4)-2) establishes
comprehensive safekeeping requirements for registered investment
advisers who have custody of client funds or securities. The rule
mandates that such assets be maintained with qualified custodians
in separate accounts, with advisers required to notify clients in
writing of custodian information and account arrangements. Advisers
must also ensure clients receive quarterly account statements from
custodians and obtain annual independent verification of client
assets by independent public accountants who must file Form ADV-E
(17 CFR 279.8) with the Commission within 120 days and report any
material discrepancies within one business day. Unless client
assets are maintained with an independent public account, the
adviser also must obtain an internal control report from an
independent public accountant. The SEC needs this information to
monitor compliance with client asset protection requirements,
detect potential custody violations and fraud, assess the adequacy
of adviser internal controls, and ensure proper segregation of
client assets from adviser assets, using the collected data for
regulatory examinations, enforcement actions, risk assessment, and
systemic oversight of adviser custody practices. This regulation
imposes third-party disclosure requirements on investment advisers,
with information provided to clients (custodian notifications and
account statements), independent public accountants (verification
arrangements), qualified custodians (account management), and the
SEC (Form ADV-E filings and discrepancy reports), while investors
and the public benefit from enhanced asset protection,
transparency, and regulatory oversight of adviser custody
operations that safeguard trillions of dollars in client
assets.
US Code:
15
USC 80b-6(4) Name of Law: Investment Advisers Act of 1940
US Code:
15 USC 80b-11(a) Name of Law: Investment Advisers Act of
1940
The current annual burden
approved by OMB for rule 206(4)-2 is 288,202 hours. We now estimate
that the total information collection hours is 315,925 hours. The
primary cause of the increase is a result of (a) an increase in the
estimated number of investors in pooled investment vehicles and (b)
an increase in the estimated average number of clients of advisers
that have custody of client assets. The currently approved annual
burden under rule 206(4)-2 includes an aggregate cost estimate of
$174,367,000. We now estimate that the annual cost burden under the
rule would increase to $176,577,000, which is attributable to an
increase in the number of advisers that will be subject to the
surprise examination requirement with respect to 5% of their
clients as well as inflation adjustments.
$0
No
No
No
No
No
No
No
Jill Pritzker 202
551-5945
No
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
20250801_3235-0241_2025-14553_90 FR 36204_30-Day Submission Notice.pdf.pdf
Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers