On June 12, 2025, the SEC formally withdrew its proposed Safeguarding Rule, which had been proposed in February 2023 as a comprehensive modernization of the Custody Rule (Rule 206(4)-2).
The proposal would have expanded custody requirements to cover a broader range of client assets including crypto assets and created new frameworks for qualified custodians of digital assets.
The withdrawal was part of a broader action in which the SEC formally withdrew fourteen outstanding rule proposals. Any future custody modernization would require a new proposal and comment period.
The existing Custody Rule (Rule 206(4)-2) remains in effect with its current requirements for qualified custodians, surprise examinations, and client asset safeguarding.
Investment advisers should continue to comply with the current custody rule requirements while monitoring any future SEC rulemaking on custody modernization.