SEC Compliance – Custody Issue

Annual Update Guidance on Custody Issue

It is that time of year that registered investment advisers are focusing on the ADV annual updating process.  Occasionally the SEC will provide guidance to managers on common questions applicable to the application or updating process.  Below is a note the SEC sent out to all registered investment advisers regarding the custody issue.  If you have questions on the application of the custody rules to your particular situation, you should discuss with your law firm or compliance consultant.

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To: SEC-Registered Investment Advisers,

This email is a reminder that all SEC-registered advisers that have custody of client assets should answer all questions in Item 9 of Part 1A of Form ADV. Each adviser’s answers will vary depending on facts and circumstances.

For example, advisers that have custody solely because they deduct fees from client accounts would respond “no” in Item 9.A. Additionally, these advisers would likely respond “no” in Items 9.B., and 9.D., and they likely would not need to provide information in Items 9.C. or 9.E. However, in Item 9.F., these advisers likely would need to indicate that there is at least one person acting as qualified custodian for their clients in connection with advisory services they provide to clients.

If you have questions, you may reply to this email.

U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, DC 20549-8549
Phone | 202.551.6999

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Cole-Frieman & Mallon is a boutique law firm which provides regulatory compliance and consulting services to the investment management industry.  Bart Mallon can be reached directly at 415-868-5345.

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