Feb. 27, 2023
COMMENT: An important issue relative to password custody that needs to be clarified by the Commission. The proposed rule seeks to: : "Require that an adviser enter into a written agreement with and obtain certain reasonable assurances from qualified custodians to ensure clients receive certain standard custodial protections when an adviser has custody of their assets. These protections are designed, among other things, to ensure client assets are properly segregated and held in accounts designed to protect the assets in the event of a qualified custodian bankruptcy or other insolvency" ISSUE: IF an adviser has custody as the result of password access to a client's retirement account (for which the adviser undergoes an annual surprise CPA examination), which account is maintained away from the adviser at a custodian that the plan sponsor has chosen and has entered into an arrangement totally independent of the adviser, how can the adviser then be required to enter into a written agreement with that custodian-the adviser has no contractual arrangement/nexus with the retirement plan or plan custodian? The only nexus is the password access given by the client (plan participant) to the adviser, as the result of which the adviser already submits to an annual surprise CPA examination. Please advise if we need to discuss. Follow me on Twitter @ThomasGiachetti, where I share industry compliance and practice protection issues with a dash of personal observations from my many years of life and industry travel. Additionally, you can sign up to receive Stark & Stark’s Compliance Alerts at www.StarkComplianceAlert.com. ___________________________________ Thomas D. Giachetti, Esq. Shareholder, Investment Management & Securities Practice Group Stark & Stark ‑ Attorneys at Law 993 Lenox Drive, Lawrenceville, NJ 08648 (Office) P.O. Box 5315, Princeton, NJ 08543 (Mailing) Website | Blog | Offices | Facebook | LinkedIn | Twitter | YouTube