SEC Staff Provides No-Action Relief from Custody Rule for Principals-Only Funds

31 March 2015
View Client Update

Key takeaways

  • The SEC staff has provided no-action relief from the audit and surprise examination requirements of the Custody Rule with respect to certain “principals-only funds.”
  • This relief is limited to funds whose investors are, among other things, executive officers of the manager who also have a material ownership stake in the manager, along with their spouses and minor children.
  • Given the restrictive definition of “principals,” the no-action relief will likely not apply to most employee or “friends-and-family” funds.