Section 460-24A-106 - Additional custody requirements for an investment adviser that directly deducts fees from client accounts(1) If you are an investment adviser registered or required to be registered under RCW 21.20.040 who has custody as defined in WAC 460-24A-005(6) because you have the authority to directly deduct fees from client accounts, you must comply with the requirements in WAC 460-24A-105 and the following additional safeguards:(a)You must have your client's written authorization. You must have written authorization from your client to deduct advisory fees from the account held with the qualified custodian.(b)You must provide notice to the qualified custodian and an itemized invoice to your client. Each time a fee is directly deducted from your client's account, you must concurrently: (i) Send the qualified custodian notice of the amount of the fee to be deducted from your client's account; and(ii) Send your client an invoice itemizing the fee. Item-ization includes the formula used to calculate the fee, the fee calculation itself, the amount of assets under management the fee is based on, the time period covered by the fee, and if you charge performance compensation, the client's cumulative net investment gain (or loss), and the amount of cumulative net investment gain above which you will receive performance compensation. You must include the name of the custodian(s) on the fee invoice.(c)You must notify the director that you will comply with these requirements. You must notify the director on Form ADV that you will comply with the requirements set forth in this section.(2)Waiver of net worth and bonding requirements. If you have custody as defined in WAC 460-24A-005(6) solely because you have the authority to have fees directly deducted from client accounts and you comply with the requirements set forth in this section, you are not required to comply with the net worth and bonding requirements for an investment adviser that has custody set forth in WAC 460-24A-170.(3)Waiver of audited balance sheet requirement. If you have custody as defined in WAC 460-24A-005(6) solely because you have the authority to directly deduct fees from client accounts, you are not required to comply with the requirement to file an audited balance sheet as set forth in WAC 460-24A-060(1) if you comply with WAC 460-24A-060(3), requirements in WAC 460-24A-105, and subsection (1) of this section.Wash. Admin. Code § 460-24A-106
Amended by WSR 14-13-068, Filed 6/12/2014, effective 7/13/2014Amended by WSR 19-03-133, Filed 1/18/2019, effective 2/18/2019Statutory Authority: RCW 21.20.450, 21.20.900, 21.20.100, 21.20.050 - [21.20].060. 08-18-033, § 460-24A-106, filed 8/27/08, effective 9/27/08.