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Article
Publication date: 1 January 2001

BRIAN CARROLL

The author, both an attorney and CPA, explores the complex and perhaps out‐of‐date Advisors Act Rule 206(4)‐2, the Custody Rule. He explores the rule and the obligations…

Abstract

The author, both an attorney and CPA, explores the complex and perhaps out‐of‐date Advisors Act Rule 206(4)‐2, the Custody Rule. He explores the rule and the obligations and concerns that arise when an investment advisor is deemed to have custody.

Details

Journal of Investment Compliance, vol. 1 no. 4
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 3 July 2017

Matthew T. Wirig and Kate S. Poorbaugh

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…

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.

Content available
Article
Publication date: 16 June 2010

Henry A. Davis

Abstract

Details

Journal of Investment Compliance, vol. 11 no. 2
Type: Research Article
ISSN: 1528-5812

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Book part
Publication date: 25 March 2021

Robert Smith

So far, in Chapters 1 and 2, we have explored the scope and power of entrepreneurship in policing and criminal contexts, and in particular, entrepreneurial policing, as…

Abstract

So far, in Chapters 1 and 2, we have explored the scope and power of entrepreneurship in policing and criminal contexts, and in particular, entrepreneurial policing, as well as having examined the inherent cultural and organisational dynamics within the service which make its implementation problematic. In Chapter 3, the author looked at how the philosophy and practice of entrepreneurial leadership has initiated entrepreneurial change in respect of organisational governance; and, in Chapter 4, the author examined the related concept of criminal entrepreneurship and established that there is also an inherent entrepreneurial nature to crime and in particular organised crime. This inherent phenomenon is also present in ordinary disorganised crime. Accordingly, the author developed an enterprise-based ecosystem model of crime and discussed what this means in terms of the entrepreneurial organisational capabilities of the police and in turn how this affects how they interdict serious and organised crime. There is a palpable mismatch. In Chapters 5 and 6, the author turned to further explore how the service can inject entrepreneurial vigour into its structures, philosophies, and everyday practices, processes, and procedures by understanding the mismatch and taking steps to initiate change. In Chapter 7, the author draws the threads of the argument together by discussing the critical need for change and provide suggestions on how to overcome obstacles and difficulties. This will entail reversing the cultures of risk-aversion, anti-entrepreneurialism, anti-intellectualism and by learning to lead entrepreneurially. Policing is a complex social process which changes as a result of social pressures and political changes and accordingly the author briefly examines some important changes brought about by the global Covid-19 pandemic which may change the way the police in the twenty-first century. Finally, the author ends by considering how to move towards a more entrepreneurial future in policing and criminal contexts.

Details

Entrepreneurship in Policing and Criminal Contexts
Type: Book
ISBN: 978-1-80071-056-6

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Article
Publication date: 4 September 2017

Joyce E. Larson, Kara J. Brown and Ivet A. Bell

To highlight guidance issued by the US Securities and Exchange Commission (SEC) for the benefit of investment advisers regarding certain obligations under the Investment…

Abstract

Purpose

To highlight guidance issued by the US Securities and Exchange Commission (SEC) for the benefit of investment advisers regarding certain obligations under the Investment Advisers Act of 1940 (Advisers Act) and the rules thereunder.

Design/methodology/approach

Summarizes recent guidance regarding issues related to several challenging Advisers Act requirements, including inadvertent custody and client account transfers under Advisers Act Rule 206(4)-2, the use of participating affiliate arrangements pursuant to the “Unibanco” no-action letters, unique considerations affecting automated advisers (i.e., “robo-advisers”), the top five most frequently identified compliance topics identified in examinations conducted by the SEC’s Office of Compliance Inspections and Examinations (OCIE), and recent guidance regarding the private fund regulatory filing Form PF.

Findings

This guidance may assist advisers in preparing for regulatory examinations and questions from institutional investors. While the recent guidance addresses important topics, the guidance also raises some practical questions.

Originality/value

Practical guidance from experienced securities and financial services lawyers.

Details

Journal of Investment Compliance, vol. 18 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 18 June 2021

Holly Smith

To explain how the U.S. Securities and Exchange Commission (SEC), in its Digital Asset Securities Release, issued on December 23, 2020, laid out its vision for how…

Abstract

Purpose

To explain how the U.S. Securities and Exchange Commission (SEC), in its Digital Asset Securities Release, issued on December 23, 2020, laid out its vision for how broker-dealers can comply with the custody requirements of Rule 15c3-3 under the Exchange Act (the Customer Protection Rule) for investments in digital asset securities.

Design/Methodology/Approach

Explains the current regulatory uncertainty for broker-dealers doing a business in digital asset securities and developing systems and procedures that result in compliance with the custody requirements of the Customer Protection Rule; seven minimum steps that broker-dealers can take and nine terms and conditions with which they can comply to protect against SEC enforcement action; and the SEC’s request for comment in response to its position statement.

Findings

A broker-dealer operating pursuant to the terms and conditions of the position statement articulated in the Release will not be subject to SEC enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of the Customer Protection Rule.

Originality/Value

Practical guidance from experienced financial services, broker-dealer and securities lawyer.

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Article
Publication date: 16 June 2010

Jessica Forbes and Mark Molle

The purpose of this paper is to explain amendments to the Investment Advisers Act custody rule, that recently became effective, which are intended to provide advisory…

Abstract

Purpose

The purpose of this paper is to explain amendments to the Investment Advisers Act custody rule, that recently became effective, which are intended to provide advisory clients with additional protections when a registered investment adviser has access to client assets.

Design/methodology/approach

The paper explains changes to the custody rule related to the definition of custody, delivery of account statements, surprise examinations, exemptions related to pooled investment vehicles, required internal control reports for advisers who maintain client assets themselves, the surprise examination requirement for privately offered securities, and amendments to Form ADV. It also explains effective and compliance dates.

Findings

Advisers should consider how to revise and tailor their written policies and procedures relating to custody; whether to continue the use of affiliated custodians; how to allocate the expenses for compliance with the new requirements, including accountants' fees for surprise examinations, internal control reports and liquidation audits; and whether to amend fund disclosure documents or separate account agreements to address expense allocation or other issues arising as a result of the new requirements.

Originality/value

The paper provides practical guidance from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 11 no. 2
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 11 September 2009

Lauren Blumenthal Kleiman

The purpose of this paper is to explain a recommendation from the SEC Division of Investment Management for new rules focused on strengthening control over client assets…

Abstract

Purpose

The purpose of this paper is to explain a recommendation from the SEC Division of Investment Management for new rules focused on strengthening control over client assets held by registered investment advisers (RIAs) or their affiliates.

Design/methodology/approach

The paper describes Rule 206(4)‐2 under the Investment Advisers Act of 1940, known as the investment adviser “custody rule”; summarizes the three proposed amendments, which would require surprise examinations, written SAS‐70 reports, and delivery of account statements directly to advisory clients; and notes several concerns voiced by SEC commissioners.

Findings

The proposed rule amendments respond to the recent discovery of a number of investment adviser Ponzi schemes and other frauds that evidence an urgent need to reassess the regulations governing RIA custody. The SEC staff will respond to public comments and expect to have an active dialog with both RIAs and custodians in the course of developing final rules.

Originality/value

The paper presents expert analysis from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 10 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 25 November 2013

Elliott Curzon and Jeanette Wingler

The purpose of this paper is to summarize the SEC's recent approval of amendments to its net capital, customer protection, books and records, notification and reporting…

Abstract

Purpose

The purpose of this paper is to summarize the SEC's recent approval of amendments to its net capital, customer protection, books and records, notification and reporting requirements for broker-dealers, in an effort to enhance financial responsibility and investor asset safekeeping obligations.

Design/methodology/approach

The paper summarizes new requirements for broker-dealers relating to custody, reporting, and Rules 15c3-3 (customer protection rule), 15c3-1 (net capital rule), 17a-3 and 17a-4 (books and records rules) and 17a-11 (notification rule) under the Securities Exchange Act of 1934; explains that several of the amendments approved codify long-standing SEC staff interpretations of the rules and accounting standards that govern these requirements; clarifies whether the requirements apply to broker-dealers that carry customer accounts on their books (commonly referred to as “carrying brokers”) and/or to limited-purpose broker-dealers that do not carry customer accounts on their books.

Findings

Although certain of the amendments codify long-standing SEC staff interpretations of the rules and accounting standards, broker-dealers will be subject to additional legal and regulatory requirements resulting from the amendments commencing in October 2013.

Practical implications

Broker-dealers should begin to consider whether changes to operations, policies and procedures, and reporting obligations will be required as a result of the amendments.

Originality/value

The paper provides practical explanation by experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 14 no. 4
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 25 November 2020

Melody (Fan) Yang

To explain the key amendments to China’s rules governing fund custody business and highlight the implications for private fund managers.

Abstract

Purpose

To explain the key amendments to China’s rules governing fund custody business and highlight the implications for private fund managers.

Design/methodology/approach

The article analyses, from the perspective of private fund managers, the key amendments to the rules governing fund the custody business in China in terms of custody of fund assets, the fund settlement and clearing process, valuation, disclosure and reports, investment supervision, review of distributions and governance.

Findings

The revised rules governing the fund custody business allow private fund managers to use their global custodian in China locally and leave room for managers and custodians to agree on their responsibilities and risk allocation in the fund contract.

Originality/value

The article offers practical guidance on how private fund managers may contractually allocate responsibilities and risks between themselves and fund custodians in the fund contract.

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