In response to the Madoff Ponzi scheme and other frauds, the U.S. Securities and Exchange Commission last May proposed changes to its custody rules that apply to registered investment advisers. Following a public comment period that generated more than 1,300 comment letters, the SEC published its final rules on December 30, 2009 and established an implementation schedule that goes into effect in stages over the course of 2010. This alert discusses the new requirements. Although the SEC decided not to prohibit an adviser from maintaining custody of its client assets, the agency asserted its intent to “encourage the use of custodians independent of the adviser to maintain client assets as a best practice whenever feasible."

Click here to view full memo, "SEC Amends Investment Adviser Custody Rules"