Custody & Protection: SEC's Custody Rule Amendments and Implications for Registered Private Fund Advisers


On December 30, 2009, the Securities and Exchange Commission (SEC) published a final rule release (Release) adopting amendments (Rule Amendments) to the custody and recordkeeping provisions of Rule 206(4)-2 and Rule 204-2 under the Investment Advisers Act of 1940 (Advisers Act), respectively.1 The SEC’s stated goal for the Rule Amendments is to enhance the safekeeping of investors’ assets. Registered investment advisers (RIAs) may need to update their partnership agreements, fund documentation, GAAP compliance, and compliance policies and procedures to ensure conformity with the Rule Amendments, as well as update their Form ADV disclosures. Although exemptions are available, RIAs are cautioned to carefully review their requirements before relying on them. The Rule Amendments generally took effect on March 12, 2010, with some exceptions regarding compliance dates.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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