Category: Articles & Publications

COMPLIANCE WATCH: Investment Advisors Hunt For New Custodians

Dow Jones Newswire, February 25, 2009

The need to hedge against the continued volatility in the financial markets has many investment advisers looking to alternative investments. Guy F. Talarico, CEO of Alaric Compliance Services, LLC, was quoted in an article discussing the challenges that these custodians of alternative assets face.

“These types of investments, by their nature, aren’t traditional assets that are settled and cleared with Depository Trust Company. There are valuation issues and questions about whether the asset is really there. Swaps, for example, are actually held by the prime broker who generates the contract. The broker then typically provides the custodian with a statement that explains the broker’s holdings and their value. You’re relying on the prime broker telling you, ‘This is what the contract is worth’. Mispricing could mean inaccurate net asset value of the entire portfolio.”

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