The 2017 Guidance Update indicated that a separate and clear written understanding between the RIA and the custodian limiting the RIA’s authority to “delivery versus payment” (DVP) trading, notwithstanding the language in the custodial agreement, was one way an RIA could avoid Inadvertent Custody. This suggested approach has been widely criticized within the industry as unworkable because the custodian has little incentive to accept or acknowledge the RIA’s limitations on its own authority where the RIA has no contractual relationship with the custodian. Adviser industry groups have engaged the SEC staff in extensive discussions regarding this issue, and the industry has awaited additional guidance.
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