Custody Rule

News & Analysis as of

SEC Staff Provides Guidance on Custody Rule Compliance When Private Funds Use SPVs and Escrow Accounts

The staff of the SEC’s Division of Investment Management issued IM Guidance Update No. 2014-7 (the “Guidance Update”) to provide guidance on how Rule 206(4)-2 under the Investment Advisers Act of 1940 (the “Custody Rule”)...more

The SEC Provides Guidance on Custody Rule Compliance for Private Fund SPVs and Escrow Accounts

In June 2014, the staff of the Securities and Exchange Commission’s (SEC’s) Division of Investment Management provided guidance (the Guidance Update) on how private fund managers using special purpose vehicles (SPVs) and...more

New SEC Guidance on Application of Custody Rule to SPVs and Escrow Accounts

The Securities and Exchange Commission (SEC) recently issued a guidance update (Update) on Rule 206(4)-2 of the Investment Advisers Act of 1940 (Custody Rule), which regulates the custody practices of registered investment...more

SEC Issues Guidance on Application of Custody Rules to Special Purpose Vehicles and Escrows

The Division of Investment Management of the Securities and Exchange Commission (the SEC) recently released an IM Guidance Update with respect to the custody rule, Rule 206(4)-2 (the Custody Rule) under the Investment...more

SEC Charges Investment Adviser with Custody Rule Violations

The Securities and Exchange Commission recently announced that it had charged Professional Investment Management, Inc. (PIM), an investment adviser, and its president, Douglas E. Cowgill, with violating rules governing the...more

It Starts with the Custody Rule

If you’re an investment adviser with custody of your client’s assets, is there a more important rule to be sure you’re on top of than the custody rule? If you’re on the SEC’s IA exam staff, is there a more important rule to...more

This Week In Securities Litigation (Week ending May 9, 2014)

The Commission issued an order which stayed the small segment of its controversial conflict mineral rule which the Court of Appeals concluded violated the First Amendment. The order does not impact the bulk of the rule. This...more

SEC Brings Another Custody Rule Case

The SEC brought another in what may become a series of custody rule cases. This action was brought against Professional Investment Management, Inc., and its principal, Douglas Cowgill. SEC v. Cowgill, Case No. 2:14 CV 396...more

SEC Charges Adviser, Others In Fee Splitting Scheme

A registered investment adviser and its principals were named as Respondents in a proceeding that centers on allegations of undisclosed revenue sharing arrangements, conflict of interest, violations of the custody rule and...more

Commissioner Adopts Rewrite Of Investment Adviser Custody Rule

To many, the words “custody” and “hide” would seem to have absolutely nothing in common. Etymologically speaking, however, they are cognates (blood relatives). Their common ancestor is the Proto-Indo-European etymon –...more

Accountants Have to Follow the Custody Rule, Too

I don’t want to keep harping on the investment adviser custody rule. Look, I mean, SEC CustodyFest was fun, but we’re not going back in that depth. Someday maybe, but not today. But I’m going to harp a little bit. Because...more

Policy Statement Released Concerning the Custody Rule for Massachusetts-Registered Investment Advisers

In light of custody-related deficiencies identified by the Massachusetts Securities Division in recent examinations of Massachusetts-registered investment advisers, the Division released a Policy Statement on November 14,...more

SEC CustodyFest Vol. 3: Jason Returns

In this last chapter of SEC CustodyFest, we visit Knelman Asset Management Group. For this case, I’m mostly interested in discussing a change to the SEC’s custody rule, Rule 206(4)-2, from 2010....more

Massachusetts Securities Division Issues Policy Statement on Custody Requirements for Massachusetts-Registered Advisers in...

In conjunction with the release of a preliminary report describing an initiative by the Registration, Inspections, Compliance and Examinations Section of the Massachusetts Securities Division of the Office of the Secretary of...more

SEC CustodyFest Vol. 1: A New Beginning

Imagine being Andrew Bowden. As director of the SEC’s Office of Compliance, Inspections and Examinations, you know you don’t have enough staff to conduct reasonably regular exams of registered investment advisers. You also...more

SEC Charges Manager Of Private Equity Fund With Violation Of The Custody Rule

The SEC has settled an administrative action with the managing member of a fund of private equity funds. In an examination the SEC staff learned that the manager was violating the custody rule (Rule 206(4)-2 under the...more

SEC Action Targets Investment Adviser Custody Rule Violations

On October 28, the SEC announced enforcement actions against three investment advisory firms and certain executives for allegedly violating the “custody rule,” which was updated in 2010 and applies to SEC-registered...more

SEC Targets More Firms for Custody Rule Violations

On October 28, 2013, the SEC sanctioned three registered investment advisers for, among other things, violating Rule 206(4)-2 under the Advisers Act (the “Custody Rule”). These settled actions, the subject of a special SEC...more

Broker-Dealers to Face Tougher Custody Rules

The SEC recently adopted significant changes to the broker-dealer reporting rules. The SEC proposed the changes to Rule 17a-5, Reports to be made by Certain Brokers and Dealers, in 2011 and released the final rule on July...more

SEC Division of Investment Management Provides Guidance Regarding the Custody Rule and Privately Offered Securities

The Division of Investment Management (Division) of the U.S. Securities and Exchange Commission (SEC) recently posted an IM Guidance Update that expands the applicability of an exception from the Custody Rule (as defined...more

SEC Staff: Private Stock Certificates May Not Be Subject to Custody Rule

In a recent IM Guidance Update, the SEC’s Division of Investment Management said that it would not object if registered investment advisers (RIAs) to certain private funds do not maintain “private stock certificates” with a...more

"SEC Provides Custody Rule Relief for Privately Offered Securities"

On August 1, 2013, the Division of Investment Management of the Securities and Exchange Commission published an IM Guidance Update (the “Update”) regarding Rule 206(4)-2 (the “Custody Rule”) under the Investment Advisers Act...more

"Possession, Custody, Or Control" In eDiscovery

Federal Rule of Civil Procedure 34(a) requires litigants to produce documents – including, of course, ESI – so long as those documents are in their “possession, custody, or control.”...more

SEC Releases Guidance with respect to Privately Offered Securities and the Custody Rule

Overview and Background - Late last week, the Division of Investment Management of the U.S. Securities and Exchange Commission (the “SEC”) released an IM Guidance Update with respect to the custody rule, Rule 206(4)-2...more

SEC Offers Custody Rule Relief to Venture Capital and Private Equity Funds

Following the adoption of the Dodd-Frank Act and amendments to the rules under the Investment Advisers Act of 1940 (the “Advisers Act”) adopted by the SEC, many previously unregistered managers to private funds, including...more

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