Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers

Forms and Documents

Document Name	Status
20250801_3235-0241_2025-14553_90 FR 36204_30-Day Submission Notice.pdf.pdf Supplementary Document	2025-08-01
2025 05 01_90 FR 18720_3235-0241_60-Day Collection Notice.pdf Supplementary Document	2025-05-01
Rule_206(4)-2 (2025) Supporting_Statement.pdf Supporting Statement A	2025-04-18

IC Document Collections

IC ID	Document Title	Status
34671	Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers	Modified

ICR Details

OMB Control No: 3235-0241	ICR Reference No: 202504-3235-016
Status: Received in OIRA	Previous ICR Reference No: 202205-3235-017
Agency/Subagency: SEC	Agency Tracking No: IM
Title: Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers
Type of Information Collection: Extension without change of a currently approved collection	Common Form ICR:  No
Type of Review Request: Regular	Date Submitted to OIRA: 08/01/2025

	Requested	Previously Approved
Expiration Date	36 Months From Approved	10/31/2025
Responses	33,514,391	24,133,429
Time Burden (Hours)	315,925	288,202
Cost Burden (Dollars)	176,577,000	174,367,000

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Abstract: Rule 206(4)-2 under the Investment Advisers Act of 1940 (17 CFR 275.206(4)-2) establishes comprehensive safekeeping requirements for registered investment advisers who have custody of client funds or securities. The rule mandates that such assets be maintained with qualified custodians in separate accounts, with advisers required to notify clients in writing of custodian information and account arrangements. Advisers must also ensure clients receive quarterly account statements from custodians and obtain annual independent verification of client assets by independent public accountants who must file Form ADV-E (17 CFR 279.8) with the Commission within 120 days and report any material discrepancies within one business day. Unless client assets are maintained with an independent public account, the adviser also must obtain an internal control report from an independent public accountant. The SEC needs this information to monitor compliance with client asset protection requirements, detect potential custody violations and fraud, assess the adequacy of adviser internal controls, and ensure proper segregation of client assets from adviser assets, using the collected data for regulatory examinations, enforcement actions, risk assessment, and systemic oversight of adviser custody practices. This regulation imposes third-party disclosure requirements on investment advisers, with information provided to clients (custodian notifications and account statements), independent public accountants (verification arrangements), qualified custodians (account management), and the SEC (Form ADV-E filings and discrepancy reports), while investors and the public benefit from enhanced asset protection, transparency, and regulatory oversight of adviser custody operations that safeguard trillions of dollars in client assets.

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Authorizing Statute(s): US Code: 15 USC 80b-6(4) Name of Law: Investment Advisers Act of 1940
   US Code: 15 USC 80b-11(a) Name of Law: Investment Advisers Act of 1940
  

Citations for New Statutory Requirements: None

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Associated Rulemaking Information
RIN:	Stage of Rulemaking:	Federal Register Citation:	Date:
	Not associated with rulemaking

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Federal Register Notices & Comments
60-day Notice:	Federal Register Citation:	Citation Date:
	90 FR 18720	05/01/2025
30-day Notice:	Federal Register Citation:	Citation Date:
	90 FR 36204	08/01/2025
Did the Agency receive public comments on this ICR? No

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Number of Information Collection (IC) in this ICR: 1

IC Title	Form No.	Form Name
Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers

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ICR Summary of Burden

	Total Request	Previously Approved	Change Due to New Statute	Change Due to Agency Discretion	Change Due to Adjustment in Estimate	Change Due to Potential Violation of the PRA
Annual Number of Responses	33,514,391	24,133,429	0	0	9,380,962	0
Annual Time Burden (Hours)	315,925	288,202	0	0	27,723	0
Annual Cost Burden (Dollars)	176,577,000	174,367,000	0	0	2,210,000	0

Burden increases because of Program Change due to Agency Discretion: No

Burden Increase Due to:

Burden decreases because of Program Change due to Agency Discretion: No

Burden Reduction Due to:

Short Statement: The current annual burden approved by OMB for rule 206(4)-2 is 288,202 hours. We now estimate that the total information collection hours is 315,925 hours. The primary cause of the increase is a result of (a) an increase in the estimated number of investors in pooled investment vehicles and (b) an increase in the estimated average number of clients of advisers that have custody of client assets. The currently approved annual burden under rule 206(4)-2 includes an aggregate cost estimate of $174,367,000. We now estimate that the annual cost burden under the rule would increase to $176,577,000, which is attributable to an increase in the number of advisers that will be subject to the surprise examination requirement with respect to 5% of their clients as well as inflation adjustments.

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Annual Cost to Federal Government: $0

Does this IC contain surveys, censuses, or employ statistical methods? No

Does this ICR request any personally identifiable information (see OMB Circular No. A-130 for an explanation of this term)? Please consult with your agency's privacy program when making this determination.     No

Does this ICR include a form that requires a Privacy Act Statement (see 5 U.S.C. §552a(e)(3))? Please consult with your agency's privacy program when making this determination.     No

Is this ICR related to the Affordable Care Act [Pub. L. 111-148 & 111-152]? No

Is this ICR related to the Dodd-Frank Wall Street Reform and Consumer Protection Act, [Pub. L. 111-203]? No

Is this ICR related to the American Recovery and Reinvestment Act of 2009 (ARRA)? No

Is this ICR related to the Pandemic Response? No

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Common Form ICR:  No

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On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).

The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:

(a) It is necessary for the proper performance of agency functions;

(b) It avoids unnecessary duplication;

(c) It reduces burden on small entities;

(d) It uses plain, coherent, and unambiguous language that is understandable to respondents;

(e) Its implementation will be consistent and compatible with current reporting and recordkeeping practices;

(f) It indicates the retention periods for recordkeeping requirements;

(g) It informs respondents of the information called for under 5 CFR 1320.8 (b)(3) about:

(i) Why the information is being collected;

(ii) Use of information;

(iii) Burden estimate;

(iv) Nature of response (voluntary, required for a benefit, or mandatory);

(v) Nature and extent of confidentiality; and

(vi) Need to display currently valid OMB control number;

(h) It was developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected.

(i) It uses effective and efficient statistical survey methodology (if applicable); and

(j) It makes appropriate use of information technology.

If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.

Certification Date: 08/01/2025

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