Safekeeping and Commingling Prohibitions
Chapters in this video
- 0:00 Safekeeping and the Aaron-and-Iris setup
- 0:56 Segregation, street name, and free credit balances
- 1:58 The poison-in-the-punch-bowl commingling rule
- 2:35 Commingling vs conversion: mixing vs taking
- 3:42 The zero-exceptions agent borrowing ban
- 4:51 Investment adviser borrowing exceptions
- 5:40 Agent vs investment adviser lending contrast
- 6:39 USA antifraud backstop and wrap
What this video covers
- What commingling actually means (mixing client and firm assets), and why it is prohibited even when nothing is stolen
- What conversion means (taking client assets for personal use), and why it is theft while commingling is not
- The duty of safekeeping: segregated street-name holdings, proper identification and recording, and free credit balances available on demand
- Why an omnibus or pooled client-only account is not commingling, as long as the firm's proprietary assets stay out
- The absolute prohibition on an agent borrowing from or lending to any customer, with zero exceptions (no family, no bank, no affiliate, no written authorization)
- The narrow exceptions for an investment adviser borrowing from or lending to a client: broker-dealers, affiliates, and financial institutions in the lending business only
- Why the Uniform Securities Act (USA) antifraud provisions apply to all misuse of customer funds with no exemption, regardless of registration status
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