The Securities and Exchange Commission has issued another frequently-asked-questions guidance on the custody rule, with the agency’s Investment Management division seeking to clarify, among other issues, previous guidance on inadvertent custody.
New to this custody rule FAQ – which Cipperman Compliance Services argues has been updated by the SEC dozens of times – are FAQs regarding the “Definition of Custody; Scope of the Rule” section: Question II.11, and Question II.12.
As Cipperman, an independent firm offering regulatory compliance services, explains, the updated FAQ clarifies that an advisor that recommends a third-party custodian will be deemed to have custody of client assets where the custodial agreement allows the advisor to instruct the custodian to disburse or transfer funds or securities, even if the advisor does not know the contents of the custody agreement.