SEC’s custody rule requires investment advisers to hold client assets separately from their own and use a qualified custodian such as a bank or broker-dealer

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The custody rule, proposed under the former Biden administration when Gary Gensler led the agency, would expand the current custody rule to include any client assets that an adviser has custody over and would also add more protections to those assets. Registered investment advisers are subject to a custody rule, which requires them to maintain those assets with a qualified custodian, such as a bank or broker-dealer. The rule would extend those standards to the crypto industry, raising concerns about whether that would further limit the number of banks willing to do business with the sector.

Registered investment advisers are subject to a custody rule, which requires them to maintain those assets with a qualified custodian, such as a bank or broker-dealer.

The proposed rule also would require advisers to segregate their investors’ assets. The current rule requires advisers and qualified custodians to segregate funds and securities, and the new rule would expand that to all assets, Gensler said.