As the hedge fund industry continues to work on compliance with the amended custody rule, KPMG LLP hosted a webcast on March 23, 2010 focusing on specific compliance concerns and strategies.  The event was moderated by Sean McKee, Partner and Audit Sector Leader for KPMG LLP’s Investment Management Practice, and included presentations by Michael Barnes and Deborah Hynds, both of KPMG’s Advisory Services group, and John Crowley of Davis, Polk & Wardwell LLP.  The speakers addressed various issues raised by the revised custody rule, including: the changing definition of custody; the definitions of “related party” and “operational independence”; requirements concerning delivery of account statements; the “audited pool exemption”; the exemption from the annual surprise examination requirement; and the proper format for internal control reports.  This article summarizes the key points discussed with respect to each of the foregoing issues, and concludes with a discussion of how the SEC’s recent clarifications of the amended custody rule affect the scope of the audited pool exemption.  Prior issues of the Hedge Fund Law Report have included extensive coverage of the custody rule amendments and their implications for hedge funds and their managers.  See: (1) “How Should Hedge Fund Managers Revise Their Compliance Policies and Procedures in Light of Amendments to the Custody Rule?,” Hedge Fund Law Report, Vol. 3, No. 3 (Jan. 20, 2010); (2) “How Does the Amended Custody Rule Change the Balance of Power Between Hedge Fund Managers and Accountants?,” Hedge Fund Law Report, Vol. 3, No. 4 (Jan. 27, 2010); (3) “How Can Hedge Fund Managers Structure Managed Accounts to Remain Outside the Purview of the Amended Custody Rule’s Surprise Examination Requirement?,” Hedge Fund Law Report, Vo. 3, No. 5 (Feb. 4, 2010); (4) “Application to Hedge Fund Managers of the Internal Control Report Requirement of the Amended Custody Rule,” Hedge Fund Law Report, Vo. 3, No. 6 (Feb. 11, 2010); and (5) “SEC Adopts Investment Adviser Custody Rule Amendments,” Hedge Fund Law Report, Vol. 3, No. 1 (Jan. 6, 2010).