SEC Staff Offers Guidance on Custody Rule
The Staff of the Division of Investment Management has published staff responses to questions about the custody rule, offering non-binding interpretations about the new rule. Here are some of the more interesting responses: Custody will be imputed to an advisory firm where an employee of the firms serves as a trustee for a client; electronic delivery of account statements is permissible; the audit firm that does work for the advisory firm can also serve as the firm that conducts the surprise exam; one independent representative can act for all limited partners for a pooled vehicle; a pooled vehicle may miss the 120-day financial statement delivery deadline if the circumstances are unforeseeable; a client must consent to appointment of an independent representative; and the audit firm may not serve as the independent representative.
OUR TAKE: We have received many of these questions. The Staff offers some helpful guidance that should be reviewed.