Oct. 23, 2023
Here are some key points summarized for each subject. I. Introduction: - The SEC is proposing a new rule to address the safeguarding of client assets by investment advisers. - The rule aims to enhance investor protections and address gaps in the custody rule. - It includes amendments to the current rule, recordkeeping, and registration requirements. II. Discussion: A. Scope of Rule: - The proposed rule expands the coverage to include a broader range of investments held in a client's account. - It defines assets, includes discretionary authority in custody, and provides exceptions for specific situations. B. Qualified Custodian Protections: - The rule enhances the protection of client assets by addressing how investment advisers safeguard these assets. - It discusses the application of the rule to crypto assets and challenges in demonstrating exclusive control. C. Certain Assets Unable to be Maintained with a Qualified Custodian: - The rule addresses how advisers can safeguard assets that cannot be maintained with a qualified custodian. - Enhanced recordkeeping, separation of duties, and regular reviews are required. D. Segregation of Client Assets: - The rule aims to ensure client assets are segregated from the adviser's assets. - Exceptions are provided, but the rule prioritizes the protection of client assets. E. Investment Adviser Delivery of Notice to Clients: - Advisers must notify clients in writing when opening an account with a custodian. - The notice includes custodian information and custodial account number. F. Amendments to the Surprise Examination Requirement: - The proposed changes require advisers to implement a written agreement with an independent public accountant for surprise examinations. - This helps safeguard client assets and reduce the risk of loss. G. Exceptions from the Surprise Examination: - Exceptions are provided for advisers with discretionary authority over client assets and those with custody solely due to a standing letter of authorization (SLOA). H. Amendments to the Investment Adviser Recordkeeping Rule: - The amendments require advisers to maintain records related to client notifications, custodian information, transactions, and more. - This helps improve oversight and investor protection. I. Changes to Form ADV: - The changes require advisers to report custody of client assets and information about custodians and accountants involved in safeguarding assets. - This enhances transparency and regulatory oversight. J. Staff No-Action Letters and Statements: - Certain letters and statements regarding the custody rule are being reviewed, and interested parties can suggest their withdrawal. K. Transition Period and Compliance Date: - The SEC proposes a one-year transition period for advisers to comply with the new rule. - Compliance dates differ based on assets under management. III. Economic Analysis: - The SEC considers the costs and benefits of proposed rule amendments. - The analysis includes qualitative and quantified assessments of the economic effects. IV. Paperwork Reduction Act Analysis: - The proposed rule and amendments result in new collection of information requirements. - The SEC is submitting these collections for review and approval, ensuring confidentiality for certain responses. V. Initial Regulatory Flexibility Analysis: - The SEC proposes rule amendments to enhance the safeguarding of client assets. - The changes aim to improve investor protections, oversight, and risk assessment abilities. VI. Consideration of Impact on the Economy: - The proposed rule and amendments aim to enhance investor protections and SEC oversight of client assets in the advisory industry. VII. Statutory Authority: - The proposed rule, amendments, and Form ADV changes are introduced under the authority granted by sections of the Advisers Act. After reviewing these summaries, you can ask if the user has any other areas of concern or any specific questions related to the proposal to include in their public comment. Ethan Johnson