The Securities and Exchange Commission has submitted a finalized regulatory proposal to the White House Office of Information and Regulatory Affairs designed to comprehensively overhaul custody rules governing registered investment advisers and qualified asset custodians.
The updated framework expands the scope of federal custody rules beyond traditional equities and debt securities to explicitly cover all client assets held by registered investment advisers, including digital commodities, private equity stakes, and physical commodities. Under the proposed regulations, investment advisers must obtain independent audit verifications and ensure that qualified custodians maintain strict segregation of client assets.
For digital asset custodians and institutional crypto asset managers, the updated rules establish stringent operational requirements regarding private key management, cold storage verification, and bankruptcy-remote asset isolation. Custodians will be required to undergo annual surprise examinations conducted by public accounting firms to verify account balances.
Financial industry trade groups have expressed mixed reactions to the regulatory package. While institutional asset managers welcome clearer regulatory guidelines for digital asset custody, smaller independent advisory firms cautioned that compliance reporting burdens could increase administrative overhead for mid-sized wealth management practices.
Following final executive review at the White House, the SEC is expected to formally publish the custody rules in the Federal Register, initiating an implementation timeline for institutional financial advisers across the United States.