The Custody Rule Revisited
Articles by: Richey May, May 04, 2021
In general, The Custody Rule (Rule 206(4)-2) requires that advisers custody funds and securities with a qualified custodian who sends statements to the adviser’s clients on a quarterly basis at a minimum. The rule also requires that advisers have an annual surprise examination performed by a public accounting firm that is registered with the Public Company Accounting Oversight Board Board (PCAOB) and subject to regular inspections.
The Securities and Exchange Commission (SEC), however, has provided an exemption to Advisers to Pooled Investment Vehicles. This exemption allows certain advisors to annually distribute audited financial statements that have been prepared in accordance with generally accepted accounting principles (GAAP) audited by an independent public accounting firm that is registered with, and inspected by, the PCAOB within 120 days of the close of the adviser’s year end.
If you have missed the 4/30 deadline, you still have options. Download our summary of and contact Steve Vlasak to learn more about the Custody Rule, the surprise exam requirements, and what to do if you haven’t yet met your obligations.