Adviser and Regulated Fund Custody Rules; Crypto Custody Rules
AI Analysis
The SEC published a proposed rule on October 6, 2026, creating tailored custody frameworks for crypto assets held by registered investment advisers, registered investment companies, and business development companies. The proposal would permit limited adviser and regulated-fund self-custody, authorize qualifying state trust companies as custodians, and impose new safeguarding, cybersecurity, audit, reporting, disclosure, and recordkeeping requirements; it is not binding unless adopted in final form.
Key dates
- 2026-10-06
- The proposed rule was published in the Federal Register as 91 FR 63870, covering pages 63870-64103.
- 2026-12-07 Deadline
- Public comments must be received by the SEC on or before this date.
Suggested considerations
- Compliance teams may wish to determine whether client or fund crypto assets are currently held through arrangements that would constitute adviser or regulated-fund self-custody under the proposal, including arrangements involving service providers, private keys, wallets, or decentralized finance protocols.
- Firms should consider mapping proposed requirements for key management, joint authorization, asset segregation, safeguarding expertise, cybersecurity, incident response, annual review, internal control reporting, and client or investor account statements against existing custody, information-security, and operational-resilience controls.
- Advisers and regulated funds may wish to assess whether existing custodians, including state trust companies, could satisfy the proposed authorization, policy, audit, internal-control, and segregation conditions.
- Compliance teams should consider preparing comments for File No. S7-2026-35 by December 7, 2026, particularly on the proposed scope of self-custody, the qualified-custodian determination, treatment of airdropped crypto assets, decentralized finance activity, and the interaction with existing custody arrangements.
- Firms should assess potential changes to Form ADV, Form ADV-E, Form N-CEN, custody records, crypto-network records, audited financial statements, and accountant reports if the proposal is adopted.
- Investment advisers and regulated funds may wish to inventory tokenized private funds and tokenized regulated-fund shares in anticipation of the proposed additional Form ADV and Form N-CEN questions.
- Firms should distinguish proposal-stage planning from current legal obligations because the publication does not itself impose the proposed requirements and does not establish a final compliance date.
What changed
The proposal would add an adviser self-custody framework under proposed Advisers Act rule 223-1(b)(7), allowing an adviser to self-custody client crypto assets only in specified circumstances and subject to conditions addressing safeguarding expertise, documented safeguarding systems, key management, joint authorization, segregation, cybersecurity risk assessment, threat and vulnerability management, incident response and recovery, annual review, an internal control report, and client account statements. The proposal would also permit regulated investment companies and business development companies to self-custody crypto assets in limited circumstances and would allow state trust companies to custody client or fund crypto assets subject to initial and annual determinations, authorization
Compliance impact
The proposal is not currently binding, but it signals a substantial potential redesign of crypto custody compliance for SEC-registered advisers and regulated funds. If finalized substantially as proposed, firms using self-custody or state trust companies would face significant governance, cybersecurity, segregation, audit, internal-control, disclosure, and recordkeeping burdens, while gaining a cl
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original SEC source before acting. Full disclaimer.
What the SEC said
Proposed rule. The Securities and Exchange Commission (the "Commission" or the "SEC") is proposing new custody rules under the Investment Company Act of 1940 (the "Investment Company Act") and amendments to related reporting and recordkeeping requirements to address how regulated investment companies may custody…
Extract from SEC . Read the full notice at the source for the authoritative text.