SEC Proposes Overhaul of Custody Rules for Advisers, Funds and BDCs
The SEC's October 2026 proposal would rewrite custody requirements for registered advisers, registered funds and BDCs, and open pathways for crypto assets to be held by advisers and funds.
According to a Morgan Lewis alert, on October 1, 2026 the US Securities and Exchange Commission proposed significant changes to the custody frameworks for registered investment advisers, registered investment companies and business development companies, including new pathways for crypto asset custody. The alert does not set out the operative rule text, the compliance date or the comment deadline, so the precise scope — which custody models would be permitted, what safekeeping standards would apply to digital assets, and how existing third-party custodian arrangements would be treated — remains unverified from this source alone.
Sophisticated counsel should care for three reasons. First, the proposal reaches three registrant populations at once, so a manager operating an adviser, a fund complex and a BDC faces one consultation with multiple consequences. Second, custody is foundational: changes at the safekeeping layer ripple into audit, sub-adviser, valuation and offering documentation, and typically require amended agreements with existing custodians. Third, folding crypto into the mainstream adviser and fund perimeter will draw competing interest from banks, broker-dealers and qualified custodians into the comment file.
The next step is to read the adopting release once published, confirm the comment deadline and permitted-entity conditions, and map which client products need restructured custody arrangements. Interim effects should be monitored, not assumed.