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Advisers to fund of funds must deliver audited financial statements to investors by June 30, 2011

Tuesday, June 07, 2011
In a client advisory from Sadis Goldberg, the firm advised clients that in order to avoid becoming subject to additional requirements under SEC Rule 206(4)-2 of the Investment Advisers Act of 1940 (the "Custody Rule"), advisers to "fund of funds" must distribute their fund's audited financial statements to investors within 180 days from the end of their fiscal year end. Advisers will need to deliver the audited financial statements by June 30, 2011, assuming a fiscal year end of December 31st. The SEC defines a "fund of funds" as a pooled investment vehicle that invests 10 percent or more of its total assets in other pooled investment vehicles that are not, and are not advised by, a related person of the pool, its general partner, or its adviser. In general, the audited financial statements must be prepared in accordance with GAAP.

Advisers that fail to distribute the audited financial statements by the required deadline will be deemed to have custody of investor assets under the Custody Rule and be subject to additional requirements, including, but not limited to, engaging an independent public accountant to perform a surprise audit before December 31, 2011.

If you have any questions concerning this Alert or if you would like to review any annual requirements, please contact Daniel G. Viola at 212.573.8038 or via email at dviola@sglawyers.com.

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