March 16, 1992
TO: INVESTMENT ADVISER MEMBERS NO. 11-92
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 8-92
ACCOUNTING/TREASURERS MEMBERS NO. 11-92
RE: SEC NO-ACTION LETTER ON INDEPENDENCE OF INVESTMENT ADVISER'S
ACCOUNTANT
__________________________________________________________
The staff of the Securities and Exchange Commission issued
the attached no-attached letter to an investment adviser (the
"Adviser") concerning the independence of the accounting firm
that audited the Adviser for purposes under the Investment
Advisers Act.
The senior partner in the accounting firm also serves as a
co-trustee of several trusts for which the Adviser renders
investment advisory services. With respect to those trusts, the
Adviser does not have custody of any of the trusts' assets or
discretionary authority. Investment decisions are made only with
the express agreement of the other co-trustee. In connection
with the audit of the Adviser's financial statements, the
accounting firm also conducts an audit of clients' funds and
assets held by the Adviser.
The staff responded that the independence between the
accounting firm and the Adviser should not be deemed impaired
under Section 602.02.g of the Codification of Financial Reporting
Policies, which sets forth the Commission's views regarding the
effect on independence of business relationships between an
auditor and its client. Section 602.02.g states that direct and
material indirect relationships between an auditor and its client
will cause the auditor's independence to be deemed impaired. The
staff stated that in view of the active involvement of the co-
trustees other than the partner in the accounting firm, the
relationship between the accounting firm and the Adviser should
not be considered a direct business relationship. The staff also
noted that the amount of fees received from the trust clients
does not appear to be material to the Adviser and that the same
appears to be true of the fees paid to the accounting firm by the
trusts.
Amy B.R. Lancellotta
Associate General Counsel
Attachment