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The SEC provides new custody rule guidance to investment advisers

Matthew T. Wirig (Chapman and Cutler LLP, Chicago, Illinois, USA)
Kate S. Poorbaugh (Chapman and Cutler LLP, Chicago, Illinois, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 3 July 2017

Abstract

Purpose

To summarize guidance from the Securities and Exchange Commission’s (“SEC”) Division of Investment Management regarding Rule 206(4)-2 (the “Custody Rule”) under the Investment Advisers Act of 1940.

Design/methodology/approach

This article summarizes the SEC’s guidance on “inadvertent custody” created by broad authority in custodial agreements, custody created by standing letters of instruction, and adviser authority to transfer funds or securities between two or more of a client's accounts.

Findings

This article concludes that firms should review their existing client custodial agreements, standing letters of instruction and other arrangements carefully to determine whether they have custody and whether additional action is necessary.

Originality/value

This article contains information on the Custody Rule and related SEC guidance from experienced securities and financial services regulatory lawyers.

Keywords

Citation

Wirig, M.T. and Poorbaugh, K.S. (2017), "The SEC provides new custody rule guidance to investment advisers", Journal of Investment Compliance, Vol. 18 No. 2, pp. 9-12. https://doi.org/10.1108/JOIC-04-2017-0021

Publisher

:

Emerald Publishing Limited

Copyright © 2017 Chapman and Cutler LLP.