Treatment of SPVs and M&A Escrow Accounts under the Advisers Act Custody Rule

11 July 2014
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Key takeaways:

  • The staff of the SEC’s Division of Investment Management published guidance that addresses the treatment of special purpose vehicles under the U.S. Investment Advisers Act’s Custody Rule.
  • The Guidance provides that a special purpose vehicle established by a fund to facilitate an investment does not need to be audited separately from the main fund for purposes of compliance with the Custody Rule if (i) the assets of the SPV are considered within the scope of the fund’s audit; and (ii) the SPV has no owners other than the fund, the adviser and their affiliates.
  • The SEC Staff also provided guidance on the use of an escrow account in connection with the sale of a portfolio company that holds sales proceeds owed to non-clients.