This video can be viewed at the below link.[1]

What is a qualified custodian, and what does it have to do with the securities laws?

A qualified custodian—no, no, not Groundskeeper Willie from “The Simpsons.”

I’m talking about a different kind of custodian, one that safeguards your assets when you work with an investment adviser.

Investment advisers advise investors or funds with literally tens of trillions of dollars of assets under management. They advise mutual funds, hedge funds, pension and retirement funds, endowments, or those robo-adviser apps that you might use.

Thus, it’s pretty important that when you entrust your assets to an adviser, they don’t inappropriately use, lose, or abuse your assets.

That’s why we at the SEC have a custody rule. The rule requires that any adviser who can access your funds must use a qualified custodian to protect your funds.

The thing is, we haven’t updated our custody rule since 2009, just after the financial crisis, and major frauds like what happened with Bernie Madoff.

The next year, though, in 2010, given these events, Congress gave the Securities and Exchange Commission greater authority and scope to expand our custody rule to better protect your assets placed with an adviser—not just your funds or securities, but all of your assets.

Using these authorities, we put out a new proposal to do what Congress asked, and to account for the lessons and new technology from the last 13 years.

Under the proposal, a qualified custodian would be subject to independent audits, certain documentation requirements—and yes, to segregate your assets into an account with your name on it.

These updated rules would better help protect your… and Groundskeeper Willie’s … assets with advisers.

The rules would apply to crypto assets with an adviser as well. Thus, that adviser would be required to keep your crypto with a qualified custodian. Not on any crypto trading platform, based on how they currently operate, but with a qualified custodian.

Crypto companies may claim they can take proper custody of your assets. But when these companies fail—something that we’ve seen time and again—investors’ assets often have disappeared or become the property of the failed company. And you, as an investor, end up stuck in line at the bankruptcy court.

So beware, even if a crypto company claims that they custody your assets, it’s not the same as qualified custody.

Through our proposed rule, investors would get the time-tested protections—and yes, qualified custodians—they deserve. So, please weigh in on our proposal.