Custody Doesn’t Have to Be a Battle with Our Comprehensive Outline

A registered investment adviser has custody if it holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them. Advisers that have custody of client funds or securities must undergo an annual surprise examination by an independent public accountant that verifies the client funds and securities over which the adviser has custody (with a few notable exceptions). The custody rule also imposes a set of requirements on accountants conducting the surprise examination that, among other things, obligates them to alert the SEC to any discrepancies the accountants identify.

The SEC has brought many enforcement cases against advisers that have had custody of client assets and failed to obtain an annual surprise examination, and the SEC’s own examination program makes verifying client assets and identifying lapses in custodial practices a priority. This Regulation of Custodial Practices outline offers expert guidance on custody of client assets from Robert Plaze, former Deputy Director of the SEC’s Division of Investment Management. Additional product resources assist attorneys in applying this knowledge when evaluating their clients’ custodial practices and compliance programs.

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Related Content

• Investment Adviser Custodial Practice Regulation
  Review this practice note that summarizes the key elements of the Custody Rule and offers attorneys counseling investment advisers practical recommendations designed to bolster advisers’ custodial practices and controls.

• Registered Investment Adviser: Reviewing a Compliance Program
  See this guidance from practicing attorney authors on how to evaluate policies and procedures, and how to assess the efficacy of your firm’s (or client firm’s) compliance program.

• Investment Adviser Compliance Policies and Procedures Checklist
  Are your (or your client firm’s) compliance policies comprehensive and up to date? See this handy checklist—an easy way to review compliance policies for completeness.

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