Private Fund Custody
According to the SEC, Registered Investment Advisors who have custody of their clients’ funds or securities must safeguard those funds. This is a requirement set by the Custody Rule. To comply, private fund issuers may use an independent qualified custodian to hold client assets. Midland Trust Company is a qualified custodian that offers this service to private funds and organizations. Our private fund custody solutions add an intrinsic value of transparency and separation per the Custody Rule.
Benefits of Custody Service With Midland
Expand Your Investment Options
Midland is a premiere qualified custodian, focusing on providing clients with as many opportunities to invest as possible. At Midland, investments can be made in both traditional and alternative assets.
Responsive, Personalized Service
Our firm understands the Custody Rule requirements and will be responsive partners to surprise examiners and fund administrators.
Whether you are operating an established fund with a significant number of assets under management or launching a new fund and planning to raise capital, Midland can help. Midland helps you meet custody requirements and investor demand for transparency.
At Midland, your relationship is important to us. You’ll be assigned a dedicated account manager who will directly work with you to provide the utmost service.
Your clients can diversify their holdings through their Midland Dash online portal. With the portal, they can also transfer money, gain access to account reports, and more!
Through Midland Dash, your clients can authorize you to track their account opening and funding, as well as give you access to their current holdings and account activity.
Midland Trust Company Provides the Following Ongoing Private Fund Custody Services:
- Custody of assets and cash
- Register all assets in Midland’s name
- Processing all new purchases/liquidations
- Monitors all incoming and outgoing payments
- Provide fund-level statements to all investors of the fund
- Physical custody of original documents (i.e., stock certificate)
- No re-registration of assets
- No cash custody or payment processing
- Essentially a “safety deposit box”
Benefits of Custody Examination VS Financial Statement Audits
There are many benefits of custody examination vs. financial statement audits. Midland opens accounts at the fund level to hold cash and alternative investments. These alternative investments include private equity/debt, VC, and real estate. We process transactions for the fund and report all holdings and activity to the fund and its participants quarterly. Midland provides a customizable solution and pricing plan based on each fund’s structure and needs. We understand the Custody Rule requirements and are responsive partners to surprise examiners and fund administrators.
Midland does not endorse investments, give tax, investment, or legal advice. Therefore, we will never compete with you for your clients’ business. We act as a third party to your clients and their investment choices. At Midland, your relationship is important to us. You’ll be assigned a dedicated account manager who will directly work with you to provide the utmost service.
Contact Midland Trust today, and a member of our business development staff will discuss your fund-level custody needs. You may also call us at (312) 767-6863.
Operating Your Private Fund
What are the responsibilities of each service provider to my Private Fund account?
Fulfills any legal documentation or regular registrations.
Forms private fund and entities
Registers Investment Advisor
Files ADV form
Performs reports for investors and reviews investor onboarding.
Performs accounting for portfolio
Furnishes investor statements
PCAOB-registered firm to administer surprise exam or full, annual audit.
Generates tax filing documents for manager and investors
Conducts surprise exam
Completes K-1s for investor
Transacts in public markets (NYSE and Nasdaq).
Executes trades on public exchanges
Manages portfolio margins
Provides transparency and fulfills Custody Rule requirement.
Furnishes fund-level statements to the fund & investors
Executes transactions on behalf of the fund
Manages and stores investment documents
Private Fund Custody FAQs
How Does a Qualified Custodian Differ From a Fund Administrator?
The Custodian operates at the fund-level, while the Administrator operates at an investor-level. Think of the Qualified Custodian as the home base for the cash and assets of the fund. It is where all the transactions take place and are reported. These transactions can include the fund’s incoming subscriptions, investments, distributions, and more. Whereas, the Fund Administrator is responsible for collecting information and performance reporting for each respective individual investor.
How Does a Fund Manager Operate Their Account With Midland?
Midland has developed a custom dashboard for fund managers called Midland Dash. It allows the manager to upload investment documents, initiate an investment, pay expenses, and execute the fund’s transactions. Midland Dash is designed to let fund managers manage their private fund(s) quickly and efficiently. Auditors and investors can retrieve statements and historical transaction reports at any time.
What Kind of Reporting Does Midland Provide?
For funds to adhere to the Custody Rule, Midland sends reports quarterly. Formal, fund-level statements are furnished for the fund and its investors. These statements can be delivered to most of the investors’ roster for a given quarter. In the statement made available to the fund manager, sensitive information, such as the investor’s name on contributions, is redacted.
What is Included in Midland's Private Fund Custody Service, and What Are the Fees?
Custody Services provided by Midland can be tailored to your business’ operational, administrative, and compliance needs. Whether you need to check a box for your examiners, completely outsource your “back-office” or want to deliver more value to your investors by providing transparency – Midland’s Private Fund Custody solutions can be customized to fit your needs. There is no “one-size-fits-all” approach here. Reach out to start a conversation with us, and we can present you with a solution that keeps your costs low and your fund compliant.