Feb. 24, 2023
February 24, 2023 To Whom it may concern, We appreciate the opportunity to comment on the proposed rule for outsourcing by investment advisors (S7-25-22). Overall, we support the proposed rule as it enhances the protection of clients' assets and information and put the accountability on the advisors on monitoring their key vendors. However, we have some suggestions to further improve the rule, specifically for the outsourcing of fund accounting and record keeping functions to independent third-party fund administrators. First, we recommend that the SEC create a standard due diligence questionnaire (DDQ) for all hedge fund and private equity fund advisors. This would help fund administrators avoid having to complete different versions of the DDQ for different clients, which can be time-consuming and resulting in higher costs being pass through to the clients. A standard DDQ would also ensure that all the necessary information is provided to the fund administrator for them to perform due diligence on their key vendors, making the process more efficient for both the fund manager and administrator. Second, we recommend that the SEC consider mandating the key vendors such as fund administrators to undergo an annual SOC 1 Type II certification on their key control processes. This would provide greater assurance to clients that the fund administrator has adequate controls in place that are operating effectively to manage their outsourcing relationships effectively and in compliance with the proposed rule's requirements. An SOC 1 Type II certification is a widely recognized standard for assessing a service organization's internal controls and would provide reasonable assurance to clients on sounds internal controls over their financial reporting generated by the fund administrator. We appreciate the SEC's efforts to enhance the protection of clients' assets and information and believe that these suggestions would further strengthen the proposed rule. Thank you for considering our comments. If we can be of further assistance, please dont hesitate to reach out. Sincerely, Ian Asvakovith President CEO Piedmont Fund Services, Inc.