Securities Enforcement and Regulatory Update

Digital Asset Securities Custody: U.S. SEC Issues Broker-Dealers Enforcement Relief and Requests Industry Comment

December 28, 2020

On December 23, 2020, the U.S. Securities and Exchange Commission issued a statement setting forth conditions under which certain limited scope, or special purpose, broker-dealers would be permitted to self-custody digital asset securities in accordance with the possession or control requirements of Rule 15c3-3 under the Securities Exchange Act of 1934. Only broker-dealers that exclusively deal in, effect transactions in, maintain custody of, and/or operate an alternative trading system for digital asset securities (subject to certain limited exceptions) may custody such securities in accordance with the Customer Protection Rule. The statement further discusses certain steps such broker-dealers would be expected to use to achieve such custody in compliance with the Customer Protection Rule.

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