In June 2014, the SEC’s Division of Investment Management issued a Guidance Update (Guidance) on certain obligations of advisers to pooled investment vehicles, particularly private equity funds, under Rule 206(4)-2 of the Investment Advisers Act (Custody Rule), when they invest in special purpose vehicles (SPVs) to purchase, or use escrow accounts to sell, portfolio companies.  The Guidance provides three scenarios under which advisers would be deemed to have indirect custody of the assets owned by the SPV and therefore should include the assets in the pooled investment vehicles’ financial statement audits.  The Guidance describes a fourth scenario under which advisers should treat the assets of an investment fund as a separate client for purposes of the Custody Rule, complying separately with its audited financial statement distribution requirements with respect to the investment fund.  Finally, the Guidance states that the SEC would allow advisers to maintain client funds in an escrow account with other client and non-client assets if five criteria are met.  See also “How Does the SEC Approach Custody Issues in the Course of Examinations of Hedge Fund Managers?,” Hedge Fund Law Report, Vol. 5, No. 18 (May 3, 2012).