The SEC formally withdrew its proposed Safeguarding Rule in June 2025, 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 effort by the SEC to formally withdraw fourteen outstanding rule proposals. The SEC indicated it would take a more targeted approach to custody rule modernization.
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.