Regulatory Alert #14-04 | August 8, 2014

Regulatory Alert #14-04 | August 8, 2014

New SEC Guidance on Custody Rules Offers Mixed News for Private Fund Advisers


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The U.S. Securities and Exchange Commission (SEC) staff recently issued guidance that offers both good news and bad news to private fund advisers seeking to comply with the "custody rule"2 regarding special purpose vehicles (SPVs) and escrow accounts. The guidance specifically applies to:

  • SPVs used by pooled investment vehicle (PIV) clients (e.g., hedge funds, private equity funds and real estate funds) to make investments (investment SPVs), and
  • Escrow accounts used by PIV clients when selling interests in portfolio companies (escrows).

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