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Spotlight on the SEC Custody Rule FAQ

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The SEC offered additional guidance and a related No Action letter in February 2017 regarding the SEC’s Custody Rule (rule 206(4)-2 under the Investment Advisers Act of 1940), updating the Custody FAQs previously issued by the Commission in 2010. The SEC guidance specifically discussed instances where a standing letter of authorization allowing an Advisor to transfer funds to a third party resulted in the Advisor being deemed to have “Custody” under the SEC’s Custody Rule, with some limited exceptions. We have presented the questions and the relevant sections of the SEC Custody FAQs (in italics), which best address each question.

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