Custody

You have custody when:

You or a related person holds, directly or indirectly, client funds or securities
or have any authority to obtain possession of them in connection with advisory services you provide to clients.

Examples

  • You deduct fees directly from a client’s account.
  • You accept third party checks or securities from a client.
  • You accept client fees of $500 or more, six months or more in advance.
  • You manage a private fund (i.e. hedge fund).

Requirements

Practice

Requirement (R) or Best Practice (BP)

Direct Deduction of Fees

Send statement to client showing computations (BP)

Accept 3rd party check or securities

Maintain blotter showing date received & date forwarded (R)

Accept fee payment of >$500 more than 6 months in advance

Submit audited balance sheet of firm annually OR have independent public accountant conduct a surprise audit (R)

Manage a private fund

Submit audited balance sheets of firm AND the fund OR have independent public accountant conduct a surprise audit (R)

Information has been provided by NASAA. You will be subject to all relevant laws, regulations, rules, and orders whether or not they are included in this information sheet.