US regulators 'to ramp up client protection'

23 April 2009

US market regulator the Securities and Exchange Commission (SEC) is preparing to launch draft rules that would subject investment advisers that directly hold clients' money to surprise external audits, according to reports.

The watchdog is expected to launch the proposals next month, an SEC official told the Dow Jones news service.

Although the new rules are still in draft form, they are believed to closely follow potential reforms to consumer protection policies outlined by SEC chair Mary Schapiro when she appeared before the Senate banking committee in March, the site said.

In addition to requiring that firms submit to unannounced audits, Ms Schapiro also said the SEC could demand that senior company officers attest that their firm has sufficient client protection controls.

The news service said the SEC is ramping up its consumer protection efforts in the wake of the $65 billion Madoff Ponzi fraud. Mr Madoff's investment firm had direct custody of client's money, rather than an independent third party.

Ms Schapiro was sworn in as SEC chairman in January.

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