Investment Advisers and the Custody Rule: New SEC Guidance and Actions to Take Now

The SEC’s Custody Rule imposes detailed requirements governing how an SEC-registered investment adviser must hold client assets and related obligations. For purposes of the Act, custody turns on the adviser's authority to control the disposition of client assets rather than physical custody.

In Feb. 2017, the SEC issued guidance cautioning investment advisers that common provisions in custody agreements may impute custody of client funds or securities, unless advisers take steps to avoid inadvertent custody.

The SEC also issued a no-action letter confirming that an investment adviser has custody of client assets if the adviser exercises limited authority under a standing letter of authorization (SLOA). Even if an adviser follows the requirements in the no-action letter, the adviser must include client assets on Form ADV after Oct. 1, 2017.

Listen as our authoritative panel analyzes the Custody Rule and how it is impacted by recent SEC guidance. The panel will discuss best practices for documenting client relationships and engaging in advisory activities which comply with (or avoid) the Custody Rule.

1. The Custody Rule post-Madoff
2. Disclosure, recordkeeping and other requirements under the Custody Rule
3. 2017 guidance regarding imputed custody
4. 2017 no-action letter regarding SLOAs
5. Best practices for avoiding the Custody Rule
   1. Amendments to existing agreements
   2. Revisions to forms
6. Actions to mitigate against enforcement actions under the Custody Rule

The panel will review these and other key issues:

• What are the common areas of misunderstanding with regard to the Custody Rule?
• When might an investment adviser be deemed to have imputed custody of client assets?
• What actions should investment advisers be advised to take in light of the SEC no-action letter regarding SLOAs?
• How might recent SEC guidance affect investment adviser disclosures going forward?