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ARTICLE · 21 OCTOBER 2003

SEC Issues Final Amendments to Investment Advisers´ Custody Rule

Gardner Carton & Douglas
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Executive Summary

On October 1, 2003, the SEC published final rules effecting several significant changes to the Custody Rule – Rule 206(4)-2 under the Investment Advisers Act of 1940 (the "Advisers Act") – which applies to investment advisers that are registered under the Advisers Act.

The basic change to the Custody Rule is that a registered investment adviser that maintains its clients’ assets with certain "qualified custodians" is no longer required to (i) include the adviser’s balance sheet in Part II of its Form ADV or (ii) submit to an annual surprise audit by an independent public accountant, as long as the qualified custodian sends certain periodic account statements to the adviser’s clients.

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