Regulatory Alerts2023-02-15
Safeguarding Advisory Client Assets
The Securities and Exchange Commission proposes a new rule redesignating its existing custody regulation as a safeguarding rule to modernize and strengthen protections for client funds and securities held by investment advisers. The proposal establishes enhanced qualified custodian standards, mandates stricter asset segregation and client notification protocols, and revises the annual surprise examination requirements alongside corresponding updates to recordkeeping obligations and Form ADV disclosures. These measures aim to prevent asset misappropriation and fraud by aligning regulatory safeguards with contemporary custodial practices while providing targeted exceptions for privately offered securities and physical assets that cannot be held by traditional qualified custodians.