You timely filed your Form ADV within 90 days of fiscal year end, but, did you properly answer all the questions related to custody? Not surprisingly, the Form remains confusing for many advisers, as does application of the Custody Rule itself. The SEC has issued guidance, letters to the industry, alerts and FAQs, but things continue to remain murky, and not just on the delivery vs. payment concept.<\/p>\n
Do you have custody, and are you meeting your obligations if you do? This is not a one-stop analysis. The nuances of the Custody Rule, including its application to your operations, requires you to continuously and regularly assess your business and practices, including client relationships, client onboarding processes, fee calculations, advisory contracts, client-custodial contracts, custodial relationships, client services, affiliate relationships, affiliate services, and more. On top of that, you then must accurately disclose your custodial practices, choosing your words carefully and explaining things in \u201cplain English,\u201d which in and of itself can be problematic.<\/p>\n
The SEC may be poised to soon revise the Custody Rule. But, in the meantime, it continues to expect compliance with the Custody Rule and continues to issue enforcement orders against registered advisers who fail to adhere to the Custody Rule\u2019s mandates. In short, protecting client assets is a perennial mission for the SEC; and the SEC sees little need to compromise on the important responsibility of protecting client assets, even if you are not 100% clear on the specifics of the Custody Rule and the intricacies of the required controls. This is especially true if you have custody over retail client funds or securities.<\/p>\n
Sometimes, with a little assistance, concepts that initially seem complex become simple, and responsibilities that seem overwhelming become routine. Consultants from CSS consulting arm, Ascendant, can help turn the interpretation and implementation of the Custody Rule into simple, organized routine. Additionally, the Ascendant Custody Toolkit<\/a>\u00a0provides a step-by-step program to facilitate understanding and application.<\/p>\n \u201cDo not let Custody get you down.\u201d We first will help you assess your authority over and access to client funds and securities, and then discuss required maintenance and protective measures, including if you need a surprise examination, an annual audit, an internal control report, or other controls. If you want to avoid custodial authority, we also can help you strategize on how to change your business practices.\u00a0 Finally, we can help you tailor your written policies and procedures to ensure that you are doing what you say and saying what you do, all of which needs to be in compliance under the watchful eyes of the SEC. \u00a0You timely filed your Annual Updating Amendment, but, alas, custody concerns continue and a compliance professional\u2019s work never ends.<\/p>\n
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