Custody of Customer Funds and Securities

What this video covers

• What defines custody under the Uniform Securities Act (USA): holding client funds or securities directly or indirectly, or having any authority to obtain possession
• Why automatic fee debits create custody even when an adviser never touches a physical certificate, and why related persons with access trigger custody too
• The critical distinction between custody and discretionary authority, and why one never substitutes for the other
• The two narrow three-business-day exceptions: inadvertent receipt and third-party checks forwarded promptly, plus the recordkeeping requirement that attaches to each
• NASAA's custody rule requirements: qualified custodian, notice to the Administrator on Form ADV, account-opening notice, quarterly statements, annual surprise exam, and the absolute ban on commingling
• Why quarterly statements must come from the qualified custodian, not the adviser, and what supplemental statements must include
• The four conditions for the fee-deduction exception from independent verification, and why it removes only the CPA surprise exam while leaving every other safeguard intact