SEC Division of Investment Management staff letter: Seward & Kissel LLP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20S49
DIVISION OF
INVESTMENT MANAGEMENT
July 21,2011
Robert Van Grover, Esq.

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004 US
Re: Request for no-action relief under the Investment Advisers Act of 1940

Section 206(4) and Rule 206(4)-2

In a letter to you dated October 12,2010 (the "letter"), the staff of the Division of Investment Management (the "staff' or "we") responded to your request for guidance regarding compliance by certain investment advisers with rule 206(4)-2 (the "Custody Rule") under the Investment Advisers Act of 1940, as amended (the "Advisers Act,,)l. We indicated that we would not recommend enforcement action to the Commission under Section 206(4) ofthe Advisers Act and rule 206(4)-2 thereunder against an investment adviser that engages an auditor, which is not subject to regular inspection by the Public Company Accounting Oversight Board (the "PCAOB") but which audits the financial statements of a broker or a dealer, to audit the financial statements of a pooled investment vehicle for purposes of complying with rule 206(4) 2(b)(4) (the "Annual Audit Provision"), subject to the conditions outlined in the letter. The letter states that it applies only to financial statements issued prior to the date the PCAOB adopts rules concerning the inspection of auditors of brokers and dealers or July 21, 2011, whichever date is earlier. In a telephone conversation between you and the staff on July 18,2011, you asked the staffto provide guidance regarding the temporary rule adopted by the PCAOB on June 14,2011, which, if approved by the Securities and Exchange Commission ("SEC"), would establish an interim program of inspection related to audits of brokers and dealers (the "Temporary Rule,,).2 All registered public accounting firms that audit brokers and dealers are covered by the Temporary Rule. The PCAOB has indicated that it anticipates being in a position to propose rules for a permanent program by 2013.3 See incoming letter and staff response at http://sec.gov/divisions/investment/noaction/201O/sewardkissell 0121O.pdf. 2 See PCAOB Release No. 2010-008, Proposed Temporary Rulefor an Interim Program of Inspection Related to Audits ofBrokers and Dealers. 3