A Decade After the Financial Crisis of 2008, The Financial Planning Industry is Seeking Clarity Regarding Custody Status for RIAs

Posted on February 21st, 2019 at 5:06 PM
A Decade After the Financial Crisis of 2008, The Financial Planning Industry is Seeking Clarity Regarding Custody Status for RIAs

From the Desk of Jim Eccleston at Eccleston Law LLC:

As a result of the financial crisis of 2008 and the Bernie Madoff Ponzi scheme, the SEC updated its custody rules for registered investments advisers in 2009.

The SEC’s custody rules require RIAs with custody status to pay for surprise annual examinations.  In addition, according to the SEC’s updated rules, custody status can be triggered when funds are forwarded to or from a third party on behalf of clients, or the firm controls client passwords and deducts advisory fees.

However, a decade later, the financial planning industry is still pressing regulators for more clarity regarding custody status for RIAs.

According to industry experts, about one-third of RIAs acknowledge custodial status for at least some of their clients but because of the widespread confusion about what qualifies as custody, the belief is that the number is much higher.

Furthermore, after the SEC updated its rules, it has taken aggressive enforcement actions against RIAs for not complying with its custody rules. For instance, in September, New York-based advisory firm Hudson Housing Capital settled charges with the SEC that it did not comply with the custody rule and failed to conduct annual reviews of its compliance policies and procedures.   Likewise, in July, New York-based advisory firm New Silk Route Advisors agreed to settle charges that the firm violated the custody rule each and every year since it registered with the SEC in 2012.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, financial crisis, 2008, bernie madoff, ponzi scheme, ria, sec

Return to Archive



I just received this letter from the CFP Board. Thank you, Thank you, THANK YOU!

David Y


August 8, 2022
SEC Files Suit Against Georgia Advisor Over Misappropriation of Client Funds

The Securities and Exchange Commission (SEC) is filing suit against a Georgia-based advisor, Christopher Burns, who allegedly misappropriated client funds.

August 5, 2022
SEC Fines RIA $5.8 Million Over 12b-1 Fee Infractions Tied to Wrap Accounts

The Securities and Exchange Commission (SEC) has imposed a $5.8 million fine against Private Advisor Group over 12b-1 fee violations tied to its wrap fee program. 

August 4, 2022
North Dakota Regulators Seek to Close Down Advisory Firm Selling Crypto and Weed Products

The North Dakota Securities Commissioner’s office is seeking to shut down a small West Fargo-based registered investment adviser (RIA) after its owner allegedly violated state securities laws and improperly took custody of $17.8 million in client funds beginning in 2017.