Ala. Admin. Code r. 830-X-3-.19

Current through Register Vol. 43, No. 1, October 31, 2024

Section 830-X-3-.19 - Custody Of Client Funds Or Securities By Investment Advisers

An investment adviser who takes or has custody of any securities or funds of any client must comply with the following:

(a) The investment adviser shall notify the Commission that it has or may have custody. Such notification may be given on Form ADV.

(b) The securities of each client must be segregated, marked to identify the particular client having the beneficial interest therein and held in some place reasonably free from risk of safekeeping destruction or other loss.

(c) All client funds must be deposited in one or more bank accounts containing only clients' funds.

1. Such account or accounts must be maintained in the name of the investment adviser or agent or trustee for such clients, and

2. The investment adviser must maintain a separate record for each such account showing the name and address of the bank where the account is maintained, the dates and amounts of deposits in and withdrawals from the account, and the exact amount of each client's beneficial interest in the account.

(d) Immediately after accepting custody or possession of funds or securities from any client, the investment adviser must notify the client in writing of the place where and the manner in which the funds and securities will be maintained and subsequently, if and when there is a change in the place where or the manner in which the funds or securities are maintained, the investment adviser must give written notice thereof to the client.

(e) At least once every three months, the investment adviser must send each client an itemized statement showing the funds and securities in the investment adviser's custody at the end of such period and all debits, credits and transactions in the client's account during such period.

(f) At least once every calendar year, an independent certified public accountant must verify all client funds and securities by actual examination at a time chosen by the accountant without prior notice to the investment adviser. A certificate of such accountant stating that he or she has made an examination of such funds and securities, and describing the nature and extent of the examination, shall be filed with the Commission promptly after each such examination.

(g) This rule shall not apply to an investment adviser also registered as a dealer under Section 15 of the Securities and Exchange Act of 1934 if the dealer is:

1. Subject to and in compliance with SEC Rule 15c3-l (Net Capital Requirements for Brokers or Dealers) [ 17 C.F.R. §240.15c3 -l ] under the Securities Exchange Act of 1934, or

2. A member of an exchange whose members are exempt from SEC Rule 15c3-l, [ 17 C.F.R. §240.15c3 -l ] under the provisions of paragraph (b)(2) thereof, and the dealer is in compliance with all rules and settled practices of the exchange imposing requirements with respect to financial responsibility and the segregation of funds or securities carried for the account of customers.

Author:

Ala. Admin. Code r. 830-X-3-.19

Filed September 28, 1990.

Statutory Authority:Code of Ala. 1975, § 8-6-23.