On August 1, 2013, the SEC’s Division of Investment Management issued a Guidance Update relating to Rule 206(4)-2 under the Investment Advisers Act of 1940 indicating that it would not object if certain non-transferrable stock certificates and certain other instruments evidencing privately placed securities were not maintained with a qualified custodian by advisers to pooled investment vehicles.  Among other things, the relief could result in lower costs having to be incurred by private funds and investors to custody such privately placed securities.  This article describes the SEC’s guidance, the conditions for the relief granted and the implications for private fund managers.  For a discussion of the SEC’s heightened focus on custody issues, as highlighted in deficiencies uncovered during recent presence examinations, see “Recently Published SEC Risk Alert Reveals Significant Deficiencies in Custody Practices of Hedge Fund Managers and Other Investment Advisers,” Hedge Fund Law Report, Vol. 6, No. 10 (Mar. 7, 2013).  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).