Customer Funds and Securities: Rapid Fire
Chapters in this video
- 0:00 Conversion and commingling with Aaron the Agent
- 1:32 What counts as custody: authority versus possession
- 3:07 AAA rule for discretion and time-and-price trap
- 4:19 Broker-dealer written authorization versus adviser oral grace period
- 5:12 Standards of care: Reg BI, suitability, fiduciary, prudent investor
- 6:24 Rapid-fire numbers: 10, 120, and 3 business days
- 7:18 Final knowledge check and next explainer preview
What this video covers
- Why authority to obtain funds, not physical possession, is the custody trigger, and how fee deduction alone puts an adviser in custody
- The three-business-day rule for inadvertent receipt of a third-party check, and the records required to avoid triggering custody
- The AAA memory aid for spotting discretion: missing asset, action, or amount means the order is discretionary
- Why time-and-price-only direction is never discretion, even when the professional chooses the timing and execution price
- The exact authorization deadlines: broker-dealer and agent require written authorization before the first trade, while an investment adviser may use oral authorization first but must obtain written authorization within 10 business days
- The distinction between full trading authorization (trade and withdraw) and limited trading authorization (trade only)
- Why Regulation Best Interest applies to retail customers of broker-dealers, suitability applies to non-retail institutional accounts, fiduciary duty applies to investment advisers, and the prudent investor standard applies to trustees
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