The Securities and Exchange Commission’s Division of Investment Management is soliciting input on custody of digital assets by registered investment advisors.
For custody purposes, are digital assets “funds,” “securities” or neither? notes Nicolas Morgan, partner at Paul Hastings in Los Angeles.
As the IM Division notes in a notice published Tuesday, in February 2017, IM issued Guidance Update 2017-01, which discussed the custody rule under the Investment Advisers Act of 1940.
Following that guidance, investment advisors and other market participants raised issues regarding the regulatory status of investment advisor and custodial trading practices that are not processed or settled on a delivery versus payment, or non-DVP, basis.
IM staff said Tuesday that it welcomes engagement from advisors, other market participants and the public on these issues, as well as on questions regarding the application of the Custody Rule to digital assets, and whether revisions to the Custody Rule could be helpful in addressing the issues cited in the notice.
To further inform IM’s consideration of how characteristics of digital assets impact the application of the Custody Rule, the staff said that it would like further input on such questions as the challenges investment advisors face in complying with the Custody Rule with respect to digital assets.