Notice: This post was migrated from one of our legacy websites and might not display correctly.
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.