Custody of customer assets
Custody of customer assets in Financial & Capital Markets sits under active scrutiny from the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, and the European Securities and Markets Authority, each operating overlapping but distinct frameworks for how firms hold, segregate, and account for client property. The SEC's 2023 amendments to the Investment Advisers Act custody rule expanded covered assets to include crypto and broadened the definition of qualified custodians, forcing compliance teams to re-examine custodial arrangements they had not revisited in years. The pressure is structural, not cyclical.
Watch
- SEC Safeguarding Rule (proposed 2023): final action timeline still open
- ESMA's AIFMD II custodian liability provisions took effect January 2024
- CFTC enforcement pattern: FCM segregation shortfalls drawing larger civil penalties
- Sub-custodian due diligence documentation requirements differ across SEC, CFTC, and FCA regimes
- State-level crypto custody licensing: New York and Wyoming frameworks diverge materially
Recent material activity in Financial & Capital Markets
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SEC proposes amendments to Exchange Act Rule 3b-16 expanding ATS definition to include DeFi protocols
The SEC has proposed rule changes that would bring decentralized finance protocols under the regulatory umbrella of Alternative Trading Systems. The amendment targets platforms facilitating token swaps exceeding $50M dai…
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SEC enforcement action against crypto lending platform for unregistered securities offering
The Commission filed charges against a major crypto lending platform alleging the firm offered and sold crypto asset lending products that constituted unregistered securities. The complaint seeks disgorgement of $340M in…
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CFTC and SEC release joint statement on digital asset classification framework
The two primary federal financial regulators issued a joint interpretive statement providing guidance on when digital assets fall under securities law versus commodities law. The framework introduces a functional test ba…
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Federal Reserve announces enhanced supervisory expectations for banks with crypto asset exposure
The Board of Governors issued SR 26-4 establishing new supervisory expectations for state member banks engaging in crypto-related activities. Banks must now maintain dedicated risk management frameworks, capital reserves…
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SEC approves spot Ethereum ETF amendments allowing staking yield pass-through
The Commission approved amendments to existing spot Ethereum ETF registration statements permitting the pass-through of staking rewards to fund shareholders. The approval includes enhanced disclosure requirements and a 3…
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SEC Division of Examinations publishes 2026 priorities: crypto compliance tops the list
The SEC's examination division released its annual priorities letter placing crypto asset compliance, stablecoin reserves, and DeFi protocol governance as the top three examination focus areas for 2026. Registered invest…
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FINRA proposes new rules for broker-dealer crypto custody and customer protection
FINRA filed a proposed rule change establishing custody requirements for broker-dealers holding crypto assets on behalf of customers. The proposal requires segregated wallets, proof-of-reserves attestations, and $10M min…
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Federal Reserve Board publishes research paper on CBDC impact on commercial bank deposits
The Board published a staff research paper modeling the potential displacement of commercial bank deposits by a retail CBDC. The paper estimates 8-12% deposit migration in the first two years, with disproportionate impac…
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