The requirement to have independent custodian would not apply to private equity or venture capital (“PE/VC”) funds which are closed–ended funds offered to accredited and/or institutional investors. However, fund managers are required to disclose this fact to the investors, obtain their acknowledgement and provide investors with an audit report of the assets in each year. Fund managers must ensure customer funds are subjected to proper segregation.
PE/VC fund managers must ensure fund assets are subject to independent valuation and customer reporting by appointing independent fund administrators. Given the difficulty in arranging for PE/VC assets to be independently valued, valuation function can be performed in-house provided conflicts of interest are adequately dealt with.