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Custody Rule among 5 most frequent compliance violations, says SEC

Estimated reading time: 1 minutes, 48 seconds

Earlier this year, the Securities and Exchange Commission (SEC) released a list of its 2017 exam priorities. Among its five most frequent issues were Custody Rule compliance failures.

In the risk alert, the SEC states the following:

Advisers with custody of client cash or securities must comply with the Custody Rule. An adviser has custody if it or its related person holds, directly or indirectly, client funds or securities or has any authority to obtain possession of them. […] An adviser also has custody if it has an arrangement under which it is authorized or permitted to withdraw client funds or securities. The Custody Rule prescribes a number of requirements designed to enhance the safety of client assets by protecting them from unlawful activities or financial problems of the adviser.

One area of deficiency or weakness was advisors obtaining surprise examinations that didn’t meet Custody Rule requirements. They may not have been “surprise” at all, and certain advisors didn’t provide a full list of accounts under custody. In other cases, advisors may not have realized their access or authority over accounts, perhaps via online access or by power of attorney being given to them or related persons.

If you are concerned about your Custody Rule compliance, consider working with Kingdom Trust.

We provide simple, cost-effective solutions for various regulatory and compliance issues so you can operate with greater efficiency and transparency. Our firm integrates with you or your service provider to ensure seamless and transparent custody solutions adhering to the Rule. And we’re forward-thinking and ready to adapt to the changing regulatory landscape of our industry.

Moreover, Kingdom Trust simplifies the complexities of custody and enables you to focus more on client relationships. We provide a transparent back office solution to advisors. As a qualified custodian, Kingdom Trust provides the custody requirements, reporting services and knowledge to help you stay compliant. Additionally, you can continue to provide timely and accurate client service with aggregated data and portfolio-level visibility of client accounts. Click here to learn more about how we may assist your firm via our individual account custody.

If you have questions about Custody Rule compliance, our advisor solutions or our institutional custody solutions, please schedule an appointment with our Business Development team today!

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