Loans to and from Customers
Chapters in this video
- 0:00 Agents: the absolute prohibition on borrowing, lending, and custody
- 1:06 Zero exceptions for agents, even family or puppies
- 2:52 Investment advisers: three borrowing exceptions
- 3:49 Investment advisers: two lending exceptions
- 4:17 Defining affiliate as corporate control, not a buddy
- 4:49 Side-by-side agent versus adviser comparison
- 5:22 The bank exception trap for agents
- 6:28 Why regulators fear agent money mixing with customers
- 6:59 Rapid-fire exam recap
What this video covers
- The three activities agents are absolutely prohibited from doing: borrowing from customers, lending to customers, and acting as custodian
- Why agents get zero exceptions, including for family members, banks, or any other client type
- The three narrow situations where an investment adviser (IA) may borrow from a client: broker-dealer, affiliate, or financial institution
- The two narrow situations where an IA may lend to a client: the IA itself is a financial institution, or the client is an affiliate
- The proper definition of affiliate: an entity with corporate control, not a wealthy or connected individual
- How the exam swaps adviser exceptions onto agent fact patterns, and why the correct answer is still prohibition
- Why state regulators view agents as higher risk than advisers when personal funds mix with customer assets
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