Alert August 23, 2011

SEC Approves Proposed Rule for Interim Inspection Program Related to Audits of Broker-Dealers

The SEC issued an order approving a PCAOB rule change that establishes an interim inspection program related to audits of broker-dealers.  The interim program of inspection is designed to allow the PCAOB to begin inspections of relevant audits and auditors and provide a source of information to help guide decisions about the scope and elements of a permanent program.  Under the temporary rule, the PCAOB will publish a report on the interim program no less frequently than every twelve months, beginning twelve months after the date the rule takes effect and continuing until rules for a permanent program take effect.

On July 21, 2011, the staff of the SEC’s Division of Investment Management (the “Staff”) provided additional no-action relief to allow investment advisers to continue engaging auditors registered with, but not subject to, regular inspection by the PCAOB to audit the financial statements of pooled investment vehicles for purposes of complying with the annual financial statement requirement of paragraph (b)(4) of Rule 206(4)‑2 under the Investment Advisers Act of 1940, commonly referred to as the Advisers Act custody rule.  (For a more detailed discussion of this no-action relief, see the August 2, 2011 Financial Services Alert.) The additional relief expires upon the earlier of the approval of a permanent PCAOB inspection program for broker‑dealer auditors or December 31, 2013.