Among Proskauer partner Robert Plaze’s many achievements during his lengthy tenure in the SEC’s Division of Investment Management is the critical role he played in the development of the 2003 and 2009 amendments to Rule 206(4)‑2 under the Investment Advisers Act of 1940, the so-called “Custody Rule.” Plaze recently marshalled his experience with and expertise on the Custody Rule into a paper summarizing SEC regulatory requirements for investment advisers that have custody of their clients’ assets – or that want to avoid having custody. The Hedge Fund Law Report recently interviewed Plaze in connection with the release of that paper. This second article in our two‑part series addresses the challenges of complying with the Custody Rule; common custody violations, including inadvertent custody and lack of auditor independence; and Plaze’s tips for complying with the rule. The first article outlined the history of the Custody Rule, including the 2003 and 2009 amendments, as well as Plaze’s view on possible future amendments to the rule. See “How Should Hedge Fund Managers Revise Their Compliance Policies and Procedures in Light of Amendments to the Custody Rule?” (Jan. 20, 2010).