Scott H. Kimpel (Photo courtesy of Hunton Andrews Kurth LLP).
As we pass the two-month anniversary of the effectiveness of the U.S. Securities and Exchange Commission’s (“SEC’s”) Form 8-K cybersecurity reporting rules under new Item 1.05, this blog post provides a high-level summary of the filings made to date.
Scott Kimpel (Photo courtesy of Hunton Andrews Kurth LLP)
On February 15, 2023, by a 4-1 vote, the US Securities and Exchange Commission (SEC) proposed new rules regarding an investment adviser’s obligation to custody assets. Unlike the existing rules, if adopted, the new rules would apply to all crypto assets.
Currently, Rule 206(4)-2 under the Investment Advisers Act imposes various conditions on the custody of client “funds and securities,” but does not cover crypto assets unless they are also securities. Under newly proposed Rule 233-1 (which would replace Rule 206(4)-2), the revised “safeguarding” rule would cover virtually all client assets, including crypto assets, irrespective of their status as securities. Rule 233-1, like its predecessor, would also limit the universe of qualified custodians to certain banks and savings associations, broker-dealers, registered futures commission merchants, and certain foreign financial institutions.