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Legal Landscape: Current Topics of Interest, New SEC Restrictions on Investment Advisers and Custodians

On December 30, 2009, following massive investor losses as the result of the Madoff Ponzi scheme and other frauds, the SEC significantly amended its “Custody Rule” pertaining to the custody of assets managed by SEC-registered investment advisers. Under the prior “Custody Rule,” SEC-registered investment advisers that have custody of client funds or securities must maintain those assets with a qualified custodian. The amended Custody Rule imposes additional requirements that will, in some cases, make compliance more difficult and costly.