The recently amended Rule 206(4)-2 ("the Amended Custody Rule") means firms deemed to have custody of client funds may face additional compliance obligations. Some tips for the new year are:
• Review the services you offer that may result in a custody situation (trustee services, bill pay services, assuming role of general partner to a limited partnership).
• Review related entities and their role in custodying client funds.
• Review your operational independence from related entities with custody.
• Review your existing policies and procedures in light of new rules and business operations. Incorporate the new rules to safeguard client assets from theft, loss or misappropriation.
• Review and update your Form ADV in preparation for your Annual Updating Amendment (due 90 days following your fiscal year-end). An accurate calculation of your AUM and a count of clients will be required.
• If necessary, fulfill your obligations to provide clients with an annual privacy disclosure and offer to provide your most current brochure.
— John Gebauer is managing director of National Regulatory Services.