U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Statement at Open Meeting to Adopt Amendments Regarding Custody of Funds or Securities of Clients by Investment Advisers


Commissioner Troy A. Paredes

U.S. Securities and Exchange Commission

Washington, D.C.
December 16, 2009

Thank you, Chairman Schapiro.

Investors not only expect sound investment advice from advisers, but investors also expect advisers to safeguard the assets investors entrust to them. It follows that protections that help ensure that investment returns are not fictitious and that assets are not misappropriated benefit investors. Accordingly, I support the recommendation before us today — a recommendation that effectively tailors the Commission’s initial proposal to strike appropriate balances.

I do want to offer a word of caution. The rule amendments complement the current regulatory regime helping to safeguard client assets by adding protections when there is a heightened risk to the security of those assets. However, the enhanced safeguards do not substitute for investor diligence and care. I urge investors to review their account statements with an eye toward anomalies; to ask probing questions of their advisers when making an initial investment and on an ongoing basis thereafter; to be alert to warning signs of actual misconduct and to conditions that could allow for misconduct in the future; and otherwise to be actively engaged and appropriately skeptical in routinely evaluating their advisory relationships. The value of today’s reforms will be undercut if the new regulatory protections dissuade investors from protecting themselves, as best as they can, against fraud, misappropriation, or other abuses. Indeed, the SEC should consider what else we can do to educate investors so that investors are better positioned to perform due diligence and to hold their advisers accountable.

I would like to join my colleagues in thanking the staff from the Division of Investment Management, the Division of Risk, Strategy, and Financial Innovation, the Office of the General Counsel, and the Office of the Chief Accountant for their efforts on this rulemaking. I appreciate your commitment.



Modified: 12/16/2009