U.S. securities regulators plan tougher rules to hold investment advisers more accountable for their clients' money following money manager Bernard Madoff's massive fraud of as much as $65 billion over two decades.

The Securities and Exchange Commission voted 5-0 on Thursday to propose that investment advisers who hold their client's assets undergo a surprise exam once a year to make sure those assets exist.

In most cases, investment advisers do not physically control their clients' assets, which are maintained with a broker-dealer or bank, also known as a qualified custodian. Advisers who have custody of customers' assets either physically control or have the authority to withdraw their clients' funds.

The SEC plan is open for public comment and must be formally adopted by commissioners before it becomes a rule.

Madoff, who ran a large Ponzi scheme, was registered as a broker-dealer and subject to oversight by the industry-funded watchdog the Financial Industry Regulatory Authority and the SEC. His investment adviser business was also registered with the SEC.

We are taking this action in response to major investment scams such as Madoff and many other potential Ponzi schemes, SEC Chairman Mary Schapiro said at an SEC meeting. Schapiro headed FINRA before becoming SEC chairman this year.

A surprise exam would provide another set of eyes on client's assets and provide additional protection against theft or misuse, she said.

The surprise exam would apply to about 9,600 of the some 11,000 registered investment advisers and includes advisers who are deemed to have custody or the ability to deduct fees from their client's assets.

The SEC also proposed requiring about 360 investment advisers who physically hold their client assets in the firm or through an affiliate -- such as was the case for Madoff -- to obtain a written review by a certified public accountant.

Under the SEC proposal, the review would describe the controls the adviser has in place, test the operating effectiveness of those controls and provide the results of those tests. That report would be required to be prepared by an accountant registered with U.S. audit watchdog the Public Company Accounting Oversight Board.

(Reporting by Rachelle Younglai; Editing by Lisa Von Ahn and Maureen Bavdek)