How the SEC Turned Custody Reform from a Righteous Cause to Jihad and Why it Matters

As we finalized our new in-depth analysis of the SEC’s rewrite of the nation’s custody rules, I asked  some of the best-informed people I know if they had ever heard of a financial custodian.  All they could come up with is the name of their elementary-school custodian and, in some ways, this is apt.  Custody is among the services often called market “plumbing” because one only notices its importance when something goes wrong or realizes how risky poor maintenance is when everything gets wet.  The SEC is right to retool custody services – their abuse was all too evident in the Madoff affair and even more costly to hapless investors in the course of crypto chaos.  However, as seems often the case with the Commission, it has taken a righteous cause and turned it into a jihad.