When does an adviser have custody when it advises a client with respect to the purchase of privately offered uncertificated securities, i.e., the securities described in paragraph (b)(2)(i) of the rule?
Whether an adviser has custody of client funds and securities depends upon whether the adviser directly or indirectly holds the securities or has any authority to possess them. Custody does not turn on whether the securities are maintained with a qualified custodian. Thus, an adviser that is a general partner of a limited partnership or a trustee of a trust would always have custody of such securities held by the partnership or the trust. An adviser that does not have such legal authority to obtain possession of such securities would generally not have custody, for example if the client must sign a subscription agreement to purchase a privately offered security, and the adviser has no authority to transfer or redeem those securities without client consent to the issuer.
Related Questions
- If an adviser manages client assets that are not funds or securities, does the amended custody rule require the adviser to maintain these assets with a qualified custodian?
- What are the requirements for advisers who have custody of client funds and/or securities?
- Can the client change the securities offered in a pledge?
