SEC Proposes Significant Additional Burdens on Registered Advisers Who Have Custody of Client Assets

July 08, 2009
In the wake of recent scandals in which investment advisers were alleged to have raided client assets for personal use and deceived clients as to the safety – and in some cases, existence – of their assets, the SEC has proposed sweeping amendments to the Custody Rule. The changes are intended to assure the safekeeping of advisory assets through periodic reviews by independent accountants and enhanced disclosures to clients and regulators, and ultimately strongly discourage (though not prohibit) self-custody or the use of an affiliated custodian. This update provides an analysis of the proposed amendments in advance of the SEC’s July 28 deadline for comments.