Relief at Last – New Guidance on Inadvertent Custody

The SEC quietly provided additional guidance to the industry about inadvertent custody in supplemental responses to the Custody Rule FAQs. In Question II.11 and II.12, the SEC stated that it would not recommend enforcement against an adviser that does not have a copy of a client’s custodial agreement, and does not know or have reason to know whether the client’s custody agreement would give the adviser inadvertent custody. Note that this relief does not apply if the adviser had recommended, requested or required a client’s custodian.

This interpretive guidance clarifies the ambiguity created by previous guidance and provides advisers with much needed relief from the onerous task of determining whether they have inadvertent custody. Hopefully, the SEC will next address the “delivery vs. payment” questions surrounding the authorized trading exemption from the Custody Rule.

Post written by Allison Fraser


Ascendant’s Custody Toolkit will help you understand and document compliance with the key elements of the Custody Rule; identify accounts over which your firm has custody; identify available exceptions to certain requirements of the Rule based on industry guidance; manage a list of accounts to provide to an accountant for a surprise examination; and evidence your analysis for determining the information in Item 9 of your Form ADV Annual Updating Amendment. To learn more, click here.


Subscribe to CSS Blog

CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

Loading form...

Latest Content

Countdown to CCPA: Are You Ready to Comply with New Data Privacy Requirements?

With less than one month before the California Consumer Privacy Act (CCPA) is effective, companies are preparing to update their cybersecurity programs. Many must address the regulation’s new data privacy requirements, which have caught some financial institutions off guard. Modeled to some extent after the European Union’s General Data Protection Regulation (GDPR), the CCPA provides … Continued

ESMA Updates AIFMD Q&A on Reporting to National Competent Authorities

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers on the Alternative Investment Fund Managers Directive (AIFMD). One new Q&A has been added with regard to reporting to National Competent Authorities. ESMA has provided clarification on reporting on liquidity stress tests for closed-ended unleveraged Alternative Investment Funds (AIFs). These AIFs are exempt from the … Continued

CSS Named to RegTech 100 List of World’s Most Innovative RegTech Companies

NEW YORK – Compliance Solutions Strategies (CSS) is proud to announce its inclusion in the RegTech 100 for 2020, a list recognizing the world’s most innovative RegTech companies compiled by RegTech Analyst, a specialist research firm. “We are honored to be selected as one of the most innovative companies within such a competitive and evolving … Continued