The Securities and Exchange Commission (SEC) on Monday warned that it has found "significant deficiencies" in the ways investment advisers are handling the custody of client assets, Investment News reported.
In an investor alert, the agency said that in recent examinations, custody-related problems were identified in one-third of the firms reviewed, or about 140 firms.The SEC did not name the firms that were reviewed or cited for deficiencies.
Advisers have failed to recognize that they maintain control of their clients' assets, mixed together client, proprietary and employee assets in a single account and fallen short of surprise-exam requirements.
Advisers cited by the SEC have had to change their custody compliance policies and procedures, modify their business practices or devote more resources to custody issues. In some cases, the examiner has referred the incident to the SEC's Division of Enforcement.
"Because the safeguarding of assets is central to investor protection, it is critical that investment advisers follow our rules when they maintain custody of their clients' funds," SEC Chairman Elisse Walter said in a statement.