SEC Issues Guidance on the Application of the Custody Rule to Special Purpose Vehicles and Escrow Accounts
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In response to inquiries from registered investment advisers and issues raised by the SEC’s Office of Compliance Inspections and Examinations, the Staff of the Division of Investment Management of the SEC (the “Staff”) recently issued guidance regarding the application of Rule 206(4)-2 under the Investment Advisers Act of 1940, as amended (the “Custody Rule”), to situations when advisers to pooled investment vehicles (“Funds”) utilize: (i) special purpose vehicles when making investments (“SPVs”); and (ii) escrow accounts when selling interests in portfolio companies.
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