SEC Proposes New Oversight Requirements for Certain Services Outsourced by Investment Advisers

The Securities and Exchange Commission today proposed a new rule and rule amendments under the Investment Advisers Act of 1940 to prohibit registered investment advisers from outsourcing certain services and functions without conducting due diligence and monitoring of the service providers. “Registered investment advisers — more than 15,000 of them in total — play a critical role in our economy, advising more than 60 million accounts with combined assets under management of over $100 trillion,” said SEC Chair Gary Gensler. “Though investment advisers have used third-party service providers for decades, their increasing use has led staff to make several recommendations to ensure advisers that use them continue to meet their obligations to the investing public.