1 Under the Custody Rule, it is a "fraudulent, deceptive, or manipulative act" when an Adviser has custody of Client Assets unless the Adviser complies with certain requirements or an exception applies. 2 To comply with the Custody Rule, an Adviser who is deemed to have custody must: (1) be a qualified custodian, maintaining client assets in appropriate accounts; (2) notify clients when opening an account for the client with another qualified custodian; (3) believe, after due inquiry, that the other custodians provide periodic account statements; and (4) establish an arrangement with an independent public accountant to perform annual surprise audits.