Overview
- The SEC filed a formal proposing release (File No. S7-2026-35) on October 1, 2026 that would modernize custody rules for registered investment advisers and regulated funds.
- The draft would allow advisers and funds to self-custody crypto only as a last resort when no qualified custodian is available and requires written documentation and quarterly reassessments.
- Self-custody would carry strict safeguards including joint transfer authorization by at least two people, separate client addresses, cybersecurity and control reviews, independent accountant reports, and board oversight for funds.
- The rule would also formally recognize qualifying state-chartered trust companies as eligible custodians provided they have state authorization, audited financials, client asset segregation, and written safeguards against theft or misuse.
- The proposal opens a 60-day public comment period after Federal Register publication and comes as the SEC signals more crypto rulemaking ahead while the agency’s commission has recently changed with Commissioner Hester Peirce’s departure.