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How can I be certain that my brokerage account statements are accurate if you are both the custodian of my account and the adviser of my investments?

As an investment adviser registered with the Securities and Exchange Commission, Wealthfront is subject to Rule 206(4)-2 (the “Custody Rule”) of the Investment Advisers Act of 1940. In 2009 the SEC amended the Custody Rule because of several cases involving fraud committed by brokers and investment advisers, most notably Bernie Madoff.

The most relevant change requires registered investment advisers who custody their clients’ assets, like Wealthfront, to hire an independent auditor to verify that their client assets are reconciled to a custodian other than their brokerage subsidiary. In our case that means reconciling with our clearing partner RBC Correspondent Services. The surprise examination by the independent public accountant must be conducted at a time that is chosen by the accountant without prior notice or announcement to us and at an irregular time from year to year.

We have engaged Ernst & Young, a global leader in assurance, tax, transaction and advisory services, to perform this audit. Should Ernst & Young find any material discrepancies during the course of its examination, they would be required to notify the SEC within one business day of the finding.

 

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Wealthfront prepared this article for informational purposes and not as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront and its affiliates may rely on information from various sources we believe to be reliable (including clients and other third parties), but cannot guarantee its accuracy or completeness. See our Full Disclosure for more important information.

Wealthfront and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisor. Financial advisory and planning services are only provided to investors who become clients by way of a written agreement. All investing involves risk, including the possible loss of money you invest. Past performance does not guarantee future performance.