Lawrence P. Stadulis

Safeguarding client assets remains a priority for the SEC. While the agency’s 2023 proposed Safeguarding Rule—which sought to expand custody requirements to all client assets was withdrawn in 2025 along with 13 other proposals, the current Custody Rule (Rule 206(4)-2) remains fully in effect. Investment advisers continue to face day-to-day situations that can create custody, sometimes unintentionally, and questions about how to apply the rules persist.

This session will explore the parameters and types of custody, including first- and third-party transfers, SLOAs, related persons, and inadvertent custody scenarios. We’ll review recent SEC enforcement cases highlighting common pitfalls, examine the regulatory landscape after the proposed rule’s withdrawal, and discuss practical ways to mitigate custody risk within your firm through policy alignment, auditor oversight, personnel training, and proactive monitoring.

Learning Objectives:

• Define Custody
• Identify activities and agreements that could trigger custody, including inadvertent scenarios.
• Clarify issues surrounding SLOAs, first- and third-party transfers, and custody through affiliates.
• Learn from recent enforcement cases and understand the post-withdrawal regulatory outlook.
• Apply best practices to align firm procedures, train personnel, and maintain compliance with the Custody Rule.