Improved protection for crypto investment advisors: SEC wants to expand custody rule

• Extension to all client assets
• Qualified custodians such as banks and broker dealers
• Custody protection measures and audit by auditors

Current regulations for registered investment advisers require them to hold their clients’ money and securities with a qualified custodian. However, a rule change is intended to tighten security measures.


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Extension to all customer assets

According to the commission, the currently applicable safekeeping rule for investment advisers regarding customer funds and securities is to be extended to include all client assets held by an investment adviser. The assets should be entrusted to qualified custodians such as banks or broker dealers.

Purpose of the rule change versatile

The change to the existing rule has several purposes. For one thing, qualified custodians offer certain custody protections when managing client assets. These safeguards include that assets are properly segregated and held in accounts. This is to protect assets in the event of a custodian bankruptcy or other insolvency.

On the other hand, it is maintained that a consultant must undergo an examination by an independent auditor.

“I support this proposal because it would help ensure advisors do not improperly use, lose or misuse investors’ assets by using important powers granted to us by Congress in the wake of the financial crisis,” said SEC Chairman Gary Gensler in quoted in a press release. “Specifically, Congress has given us the authority to extend the advisors’ custodial rule to all assets, not just funds or securities. Additionally, investors would benefit from the amendments to the proposal to improve the protections that qualified custodians provide. Through these.” expanded custody rule would give investors working with advisors the trusted protections they deserve for all their assets, including crypto assets, in line with what Congress envisioned.”

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