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SEC Provides Relief from Custody Rule Amid COVID-19

April 30th | 2020



On April 27, 2020, the SEC’s Division of Investment Management clarified their relief under the Custody Rule indicating that they “would not recommend enforcement action against for a violation of rule 205(4)-2 (the “Custody Rule”) that is relying on rule 206(4)-(2)(b)(4) and that reasonably believed that the pool’s audited financial statements would be distributed within the 120-day, 180-day (in light of FAQ VI.7 or 8A), or 260-day (in light of FAQ VI.8B) deadlines, but failed to have them distributed under certain unforeseeable circumstances.”

Registered Investment Advisers relying on the audit exemption that are required to distribute audited financial statements within 120-days should have delivered those statements by Wednesday April 29, 2020.

However, provided this relief, if “unforeseeable circumstances” – perhaps such as a global pandemic – prevented or delayed that delivery, then consider reviewing this FAQ to determine whether you qualify for relief. You can find the FAQ Question VI.9 as modified on April 27, 2020 here.

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