unit 8 quiz
In instances where an investment adviser has custody or possession of clients' funds or securities, it must comply with A) the NASAA Model Rule on Custody. B) the National Securities Markets Improvement Act of 1996 (NSMIA). C) the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers. D) the SEC's Customer Protection Rule.
A) the NASAA Model Rule on Custody. There are cases on the exam where the correct answer should be obvious. If an investment adviser (IA) has custody, it must comply with the rule on custody. The SEC's Customer Protection Rule applies only to broker-dealers, not IAs.
An investment adviser may not have custody of a customer's funds and securities under the Uniform Securities Act if A) there is a rule in the state barring such custody. B) the customer fails to tell the adviser that it has custody. C) the customer does not have a wrap fee account. D) the adviser is not a registered broker-dealer.
A) there is a rule in the state barring such custody. If there is a rule barring custody, under no circumstances may the investment adviser (IA) have custody of customer funds or securities. It is the IA who must notify the customer that custody is being maintained, not the reverse.
A broker-dealer's cybersecurity procedures should address all of the following except the music played while customers are placed on hold. office desktop computers. agent's personal smartphones used on occasion to communicate with clients. remote access to servers or workstations via a virtual private network (VPN).
A. the music played while customers are placed on hold. It is hard to imagine how the music on hold would present a security risk. All of the others clearly offer potential for loss.
If a new customer opens an account with a broker-dealer and tells the agent to buy investments at her discretion, before engaging in any transactions in the account, the agent must A) have the customer supply a letter of credit from a bank. B) designate which investments will be purchased. C) receive a written discretionary power from the customer. D) register as an investment adviser.
C) receive a written discretionary power from the customer. Because the agent will be acting with discretion, a written power of attorney must be obtained from the customer before transactions can occur. This power is called discretionary power.
For purposes of safeguarding customer information, which of the following would be considered a covered account? A) An account in the name of the State of X employee pension fund B) A margin account in the name of the Interglobal Hedge Fund C) An account in the name of the Wells Morgan Bank D) A margin account in the name of Mary Beth Simmons
D) A margin account in the name of Mary Beth Simmons The term covered account does not apply to institutional customers, such as banks, pension funds, and investment companies.
Over which of the following would the investment adviser representative have discretionary authority? A) An order that specifies the size of the trade and name of the security, but leaves the choice of price or time up to the investment adviser representative B) An account in which a customer has power of attorney over another individual's account C) An account in which a trustee has power of attorney over another individual's account D) An account in which the investment adviser representative chooses portfolio securities on behalf of the client
D) An account in which the investment adviser representative chooses portfolio securities on behalf of the client An order is discretionary when it is placed for a customer's account by the member firm or its representative without the customer's express authorization. Also, for the order to be considered discretionary, the firm must choose at least one of the following: size of the trade, whether to buy or sell, or the security. Choosing time or price is not considered an exercise of discretion.
Areas of concern for protecting customer data would include agents recommending securities that are unsuitable for the customer. a vendor misusing, or inadequately protecting, confidential customer information. a retail customer loaning money to the agent handling the account. a vendor possibly failing adequately to protect confidential customer information after its relationship with the firm is terminated. A) II and III B) I and IV C) I and III D) II and IV
D) II and IV Although we generally think of security breaches occurring within the confines of the firm itself, many broker-dealers, especially smaller ones, contract with outside vendors for data storage. That can be a weak link. Unsuitable recommendations and improper loans are prohibited practices, but that has nothing to do with securing customers' personally identifiable information (PII) or sensitive personal information (SPI).
According to the Uniform Securities Act, a state-registered investment adviser may have custody of a customer's funds and securities if A) it does not share in the capital gains of the account. B) it has received the permission of the Administrator. C) it has received permission from the SEC. D) the Administrator has been informed of the custody.
D) the Administrator has been informed of the custody. As long as retaining custody of funds is not prohibited, a state-registered investment adviser may have custody of a customer's account after providing notice to the Administrator. Notice to the SEC is not required for federal covered advisers who maintain custody (but that will not be tested).
With cyber security presenting such enormous threats to the safety of firm and customer information, NASAA recommends that broker-dealers should A) avoid using VPNs. B) update antivirus software at least biennially. C) allow bona fide clients access to their accounts without using a password. D) use encryption on their files and devices.
D) use encryption on their files and devices. One of the ways to protect data is through strong encryption. Updating antivirus software every two years (biennially) is not frequent enough—some experts in the field suggest no less frequently than quarterly, and more often is better. VPNs (virtual private networks) are a good way of securing information, and allowing customer access without a password offers no protection at all.
Examples of identity theft include taking over an individual's credit card account. applying for new credit cards in the compromised individual's name. lending money in the name of the compromised individual. purchasing lottery tickets in the name of another individual. A) I and II B) I and IV C) III and IV D) II and III
A) I and II When an individual's identity is stolen, it is common to find that the thief takes over the current credit card accounts and also applies for new ones. Identity thieves borrow money in the name of the compromised individual; they don't lend it, and although buying a lottery ticket in the name of someone else could help evade taxation on a big prize, the publicity attached to the winning ticket would certainly not be something the thief would relish.
Foster Advisers operates as an investment adviser that is registered in a state where the Administrator, by rule, prohibits investment advisers from holding custody of client funds and securities. This means that Foster Advisers may not have physical custody over its clients' monies and certificates. manage client accounts on a discretionary basis. examine customers' stock certificates. A) I only B) I and III C) I and II D) I, II, and III
A) I only Under the Uniform Securities Act, custody indicates that the investment adviser (IA) has physical possession over its clients' certificates and monies. A prohibition against custody in a given state does not prohibit the IA from holding investment discretion over clients' accounts, provided such discretion is granted under a suitable authorization or power of attorney. Merely examining customers' stock certificates is certainly not the same as holding custody or possession of such certificates.
When discussing cybersecurity, the term covered account refers to A) a personal or family account for which the firm must provide data protection. B) one that meets the requirements of the NSMIA of 1996. C) an options account that is used to write covered calls. D) an account that is protected under SIPC.
A) a personal or family account for which the firm must provide data protection. Covered accounts are those opened by individuals or families (not businesses) at financial institutions where there is a reasonably foreseeable risk to customers or to the safety and soundness of the institution from identity theft.
All of the following are prohibited actions except A) executing a transaction in a registered nonexempt security in a discretionary account. B) trading in the account of a conservative client exclusively in speculative public offerings with proper trading authorization from the client. C) failing to record exempt transactions on the broker-dealer's books and records. D) sharing in profits of an account as a reward for the agent's recommendations exceeding the S&P 500.
A) executing a transaction in a registered nonexempt security in a discretionary account. Discretionary (and non discretionary) accounts may contain nonexempt securities. Because discretionary trades are categorized as solicited, those nonexempt securities should be registered. All transactions, whether exempt or nonexempt, must be recorded on the books of the broker-dealer (BD). Trading the account of a conservative client only in speculative public offerings is unsuitable and, therefore, a prohibited business practice. The only time sharing in the profits of a client's account would be permitted is with consent of both the client and the employing BD. Such consent must be stated in the choice.
The Administrator may, by rule, A) forbid investment advisers registered in that state from taking custody of client funds. B) suspend the registration of a federal covered adviser because the contract did not meet the requirements for a state-sanctioned investment advisory contract. C) suspend federal law if the Administrator believes it to be in the public interest. D) allow an agent to waive provisions of the Uniform Securities Act.
A) forbid investment advisers registered in that state from taking custody of client funds. The Administrator has considerable discretion to make rules or issue orders. Specifically, the USA allows the Administrator to prohibit custody by rule. However, the USA does not allow the Administrator to waive provisions of the USA, nor can the Administrator suspend federal law. The NSMIA took away the power of the states to regulate federal covered advisers except in the case of a violation of the antifraud statutes.
Certain types of accounts require special documentation. In which of the following cases must the required documentation be received prior to any account activity?** Discretionary account with a broker-dealer Discretionary account with an investment adviser Margin account Options account
A. Discretionary account with a broker-dealer No trading may take place in a discretionary account with a broker-dealer before receipt of the signed authorization form. In the case of an investment adviser, required receipt of the written authorization form is no later than 10 business days after the initial trade. For that initial period, oral authorization is permitted. For margin accounts, the documentation must be received promptly after the initial trade, and in options accounts, the customer agreement must be received within 15 days after the account opening.
According to the North American Securities Administrators Association's (NASAA's) Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following practices is not unethical? A) An agent sold shares at a price less than authorized by a client. B) An agent of a broker-dealer exercised discretion in deciding the time that a sale took place during the trading day without express written discretionary authority. C) To protect the client in a declining market, an agent sold all shares in the client's account when the client had only authorized the sale of 30% of the shares. D) Within the first 10 days of a client's initial transaction, an agent accepted oral discretion and purchased securities on behalf of the client.
B) An agent of a broker-dealer exercised discretion in deciding the time that a sale took place during the trading day without express written discretionary authority. An agent of a broker-dealer (BD) may exercise discretion in deciding the time or the price at which a sale takes place during the trading day without express written discretionary authority. Such action is not unethical because time and price are not considered true discretion. An agent may not exercise discretion over the number of shares to be sold without prior written discretionary authority. Oral discretion is only permitted for investment advisers and their representatives (never BDs or agents) during the first 10 business days after the initial discretionary transaction in the account.
An investment adviser maintains custody of customer's funds and securities. In order to comply with the Uniform Securities Act, the adviser must, at least quarterly, send written notice to each custodial client stating the location of the assets under custody. the changes to the location of the assets under custody. the amount of prepaid fees to be refunded upon early termination of the contract. the value of the assets under custody. A) II and III B) I and IV C) I and II D) III and IV
B) I and IV Under both state and federal laws, investment advisers maintaining custody of customers' funds and securities must notify their clients no less frequently than quarterly of the location of the assets and their value. If there should be a change to their location, it must be communicated promptly.
Which of the following documents must an existing customer sign to establish a discretionary account? A) Customer's agreement B) Trading authorization C) Options agreement D) New account application
B) Trading authorization To establish a discretionary account, the agent must receive written authorization from the customer(s) in whose name(s) the account has been established. An existing customer has already completed the new account application and signed any required customer agreements.
In the securities industry, the term discretionary refers to A) an account in which a person has power of attorney over an incompetent individual's account. B) an account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades. C) an account in which someone has been given custodial power over another individual's account. D) an order that specifies size, security, or action but leaves the choice of time or price up to the agent.
B) an account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades. An order is discretionary when the broker-dealer's agent places it for a customer's account without the customer's express authorization for that order.
Plenitude Premier Solutions (PPS) is registered in State C. If PPS wished to maintain custody of client funds or securities, A) notice is given to the State C Administrator as part of the annual updating amendment. B) prompt notice would have to be given to the State C Administrator on Form ADV. C) prompt notice would have to be given to the State C Administrator in a private letter. D) permission would have to be obtained from the State C Administrator.
B) prompt notice would have to be given to the State C Administrator on Form ADV. It is unlawful for an investment adviser, registered or required to be registered in a state, to have custody of client funds or securities unless the investment adviser notifies the Administrator promptly in writing on Form ADV that the investment adviser has or may have custody.
An investment adviser with custody of customer funds and securities must send the customer a statement of account activity no less frequently than A) with every transaction. B) quarterly. C) monthly. D) annually.
B) quarterly. An investment adviser in possession of customer assets must send a statement to the customer at least every three months. The statement must list the securities and funds held by the adviser, list their location, and show all transactions in the account since the last statement date.
An agent may determine which securities to purchase or sell for a client when A) written or oral discretion authority has been received by the broker-dealer within 10 days of the initial discretionary transaction. B) written discretion authority has been received by the broker-dealer before executing the first discretionary transaction. C) written or oral discretion authority has been received by the broker-dealer before executing the first discretionary transaction. D) written discretion authority has been received by the broker-dealer within 10 days of the initial discretionary transaction.
B) written discretion authority has been received by the broker-dealer before executing the first discretionary transaction. No broker-dealer or any of its employees shall exercise any discretionary power in any customer's account or accept orders for an account from a person other than the customer without first obtaining written authorization from the customer. It is an investment adviser who may act with oral consent for a period of 10 days from the initial discretionary trade.
The regulators are concerned when broker-dealers (or other financial professionals) maintain what are referred to as "covered accounts." Which of the following customers would not be included in the definition of a covered account? An individual margin account A corporate cash account A checking account An IRA
B. A corporate cash account Business accounts are excluded from the definition of a covered account because those are much less likely to be the subject of identity theft. Any form of individual deposit account (one where the individual deposits funds), would be a covered account
A great concern to broker-dealers is the theft of the identity of a client. To reduce the possibility of a client's assets being improperly taken, most firms would consider all of these to be a red flag except almost one year since your last contact with your client, you receive a phone call requesting that funds be wired to an offshore account. a client regularly visits your office to pick up a check representing the proceeds of recently settled transactions. when running a credit report on a new client's applications, there is a discrepancy between the home address listed on the report and the one on the new account form. the photograph on the identification documents provided does not resemble the individual opening the account.
B. a client regularly visits your office to pick up a check representing the proceeds of recently settled transactions. There is nothing wrong with a client picking up a check for the proceeds of a securities transaction, even if done on a regular basis (some folks do not trust the mail). Each of the other choices should raise a red flag as being something needing further investigation.
Which of the following statements are true of a discretionary account at a broker-dealer? It must be approved by a designated supervisory individual of the firm. It must be reviewed frequently to minimize the chances that the account has been churned. A discretionary order may be placed once the customer has placed a power of attorney in the mail. It must be approved by the Administrator of the state of residence of the client. A) III and IV B) I and III C) I and II D) II and IV
C) I and II A new discretionary account must first be approved by a designated supervisory person, and the account must be reviewed frequently for suitability and avoidance of churning. The written discretionary power must be in hand, not in the mail, before discretion may commence.
Which of the following are discretionary orders? A customer sends a check for $25,000 to an agent and instructs the agent to purchase bank and insurance company stocks when the price appears favorable. A customer instructs an agent to buy 1,000 shares of ABC Corporation at a time or price determined by the agent. A customer instructs an agent to purchase as many shares of XYZ as the agent considers appropriate. A customer instructs an agent to sell 300 shares of LMN, Inc. at the best price available in the market. A) I and IV B) II and IV C) I and III D) II and III
C) I and III Discretionary power authorizes an agent to choose at least one of the security; the amount of shares; or whether to buy or sell. Time or price alone is not a discretionary decision.
Which of the following could be red flags regarding identity theft? Receipt of a credit card for which no application was made Receipt of a replacement credit card two months before the expiration date of the current card Receipt of a notice of a change of address on a credit card account that was not made by the account holder Receipt of a notice from the credit card company with an offer for a 0% balance transfer A) I and II B) II and IV C) I and III D) III and IV
C) I and III When a credit card is received (and the recipient did not file an application) or a notice is received of a change of address (and the account holder's address has not been changed), a red flag should go up indicating possible identity theft. Replacement cards are expected before the current card's expiration date, and credit card companies often send offers for balance transfers at low rates.
As defined in the Uniform Securities Act, in which of the following cases would an investment adviser not be considered to be maintaining custody?*** A) The investment adviser has direct control over the client's securities. B) The investment adviser has indirect control over the client's securities. C) The investment adviser receives a check made payable to the IA and returns it within three business days. D) The investment adviser keeps client securities in street name.
C) The investment adviser receives a check made payable to the IA and returns it within three business days. Please remember the following: There are three cases that would not be custody revolving around the three-business-day rule. They are as follows: Receiving a check made payable to a third party and forwarding that to the third party within three business days Receiving a check made payable to the IA and returning it within three business days Receiving securities from a client and returning them within three business days If the IA has direct or indirect control over any client assets, that would be custody. Holding securities in street name is direct control. Discretion is not custody because the IA doesn't have any physical control, only the ability to make buy and sell decisions in the account.
In which of the following situations is an agent committing a prohibited practice? A) Allowing the customer to place an order to sell 100 shares of ABC from the client's discretionary account B) Buying a security on one exchange and simultaneously selling it on another to take advantage of a price disparity C) Using discretion to purchase a security in a discretionary account while awaiting a written receipt of trading authority D) Buying a security on behalf of a customer and then reselling it before the customer has paid for it
C) Using discretion to purchase a security in a discretionary account while awaiting a written receipt of trading authority Written receipt of trading authority is required before agents may conduct any trade on a discretionary basis. Oral authorization is not sufficient; it must be in writing. It is not a prohibited practice to sell a security before the customer has paid for it (day trading), and arbitrage (buying securities on one exchange and selling them on another to take advantage of temporary price differences) is also an acceptable practice. Although the agent may have trading authority in a discretionary account, nothing prohibits customers from making their own trades.
All of the following would be causes for concern about cybersecurity except A) a broker-dealer's bookkeeper prefers to do the books from home on a personal computer. B) a broker-dealer stores some of the firm's financial records electronically. C) a broker-dealer keeps all the firm's financial records in a ledger book. D) a broker-dealer's agents operate as independent contractors and maintain devices that access personally identifiable information about clients.
C) a broker-dealer keeps all the firm's financial records in a ledger book. By definition, cyber fraud could not occur with something that exists on paper only. Anytime that a broker-dealer's financial records are being handled electronically, there is the possibility of cyber fraud. There are also concerns when there is possible access to personally identifiable information about clients (Social Security number, date of birth, etc.).
A customer placed an order with an agent to sell 100 shares of ABC and he instructed the agent to limit any losses. The agent did not have written discretionary authority over the account and waited to sell the shares, hoping to get a better price for the customer. Several hours later, the price of the shares went down, so the agent sold 50 ABC shares to limit the customer's losses. According to the Uniform Securities Act, this is***** A) a permissible activity because the agent is obligated to get the best price for the customer. B) a violation because the agent is required to execute sell transactions immediately after the order is placed. C) a violation because the agent exceeded his authority. D) a permissible activity because the agent does not need written authorization to determine price or time of the order.
C) a violation because the agent exceeded his authority. An agent may determine the price and timing of a transaction without discretionary authority. As a result, the agent is not necessarily required to execute a transaction immediately after an order is placed. Where the agent went wrong here was changing the size of the order. Even with discretionary authority, when the client specifies the amount of shares and the action (sell), the agent cannot change that without the consent of the client.
Which of the following would be least likely to meet the cyber security definition of a covered account? A) A customer with a margin account at a broker-dealer B) An account with a registered investment company that permits the owner to wire funds to a third party C) A customer with an automobile loan at a bank D) A business account held by a company listed on the NYSE
D) A business account held by a company listed on the NYSE In general, business accounts are not included in the term covered account. There could be an exception for a sole proprietorship or other small business where there is a reasonably foreseeable risk to customers due to the inability of the customer to provide adequate internal safeguards. That is unlikely to be the case with a listed company.
If AAA Investment Advisers has entered into a written advisory contract with a client that contains a discretionary power, all of the following information must be stated in the contract except A) consent of the client is required for AAA Investment Advisers to assign the contract to another manager or adviser. B) AAA Investment Advisers has discretionary authority to make investment decisions on behalf of the client. C) the amount of the fee AAA Investment Advisers charges annually on the value of assets under management. D) AAA Investment Advisers shall be the only party eligible to make investment decisions in the account.
D) AAA Investment Advisers shall be the only party eligible to make investment decisions in the account. The discretionary power authorizes the investment adviser to make the investment decisions without prior approval of the client. However, nothing in that power prohibits the client from personally making the decision to buy or sell any assets in the account.
When it comes to identity theft, one of the red flags is suspicious documents. Documents that can offer hints of identity theft would include all of the following except A) the information on the identification differs from what the person with identification is telling you. B) the identification doesn't look like the photo or match the physical description of the person presenting it. C) identification that looks altered, forged, or torn up and reassembled. D) a valid passport with stamps showing visits to countries with which the United States does not have diplomatic relations.
D) a valid passport with stamps showing visits to countries with which the United States does not have diplomatic relations. Passport stamps indicating that the individual has traveled to countries with which the United States does not have diplomatic relations are generally not a cause for raising a red flag for identity theft. It might raise other concerns, but if the identity matches, identity theft would not be an issue.
Richard Alan is a longtime customer of yours and usually calls in orders identifying himself as Dick. Today, you receive a call requesting that half of the available funds in his account be wired to an offshore bank. When you say that his voice sounds different, he replies that he has a sore throat and that is why he doesn't sound like himself. Then you recall, when you answered the phone, he said it was Richard Alan calling. At first, you thought he was having fun, but now you might suspect A) his illness is more serious than a sore throat. B) this is a different Richard Alan who is a client of the firm. C) he is having financial difficulties he wishes to hide from you. D) identity theft.
D) identity theft. In many cases, the individual agent is the first line of defense against identity fraud. Spotting red flags like those posed in this question is critical to preventing losses to the company and the client.
Under the Uniform Securities Act, an investment adviser who has custody of client securities or funds must do all of the following except A) maintain one or more separate bank accounts in which client funds are deposited and keep customers' securities clearly marked and segregated. B) have client funds and securities examined at least once a year by an independent public accountant on a surprise basis. C) notify the Administrator in writing that the adviser is maintaining custody. D) send clients itemized statements no less frequently than every six months detailing the funds and securities in the adviser's custody at the end of the period.
D) send clients itemized statements no less frequently than every six months detailing the funds and securities in the adviser's custody at the end of the period. The adviser must send clients quarterly (not semi-annual) itemized statements listing the funds and securities in the adviser's custody at the end of the period and all transactions during the period. The adviser must deposit client funds into one or more bank accounts, not commingled with adviser funds, and notify the clients in writing of where and in what manner the funds are held. The adviser must also arrange for an annual, surprise audit by an independent public accountant of client funds and securities. The adviser must notify the Administrator that the adviser has or may have custody of client securities or funds.
All of the following client orders would require discretionary authorization except "Buy me 100 shares of a stock with a dividend of at least 4%." "I need a tax write-off, so sell something out of my portfolio to general a capital loss." "I'm going to need some cash, so sell something I own." "Please buy 300 shares of XYZ stock for me when you think the price is right."
D. "Please buy 300 shares of XYZ stock for me when you think the price is right." Buy 300 shares of XYZ stock for me is correct because the client has specified the name of the asset, the action, and the amount. All the client is asking is that the agent determine the right price. Determining price or time is not considered the exercise of discretion.
Under Regulation S-P, if an investment adviser sends a customer an initial privacy notice that contains an opt-out provision, the firm may not disclose nonpublic, personal information about that customer for how many days from the mailing? A. 10 B. 15 C. 20 D. 30
D. 30 An investment adviser (or broker-dealer) must give a customer 30 days to implement any opt- out provision in the privacy notice
Protection of customer confidential information is an obligation of the agent servicing the customer's account. broker-dealer maintaining the account. customer. investment adviser in an advisory account. I and II II and IV III and IV I, II, III, and IV
D. I, II, III, and IV Although any securities professional handing a customer account is obligated to follow all necessary procedures to protect client data, customers themselves also bear a responsibility. Customers ignoring the cybersecurity safeguards put not only their own data at risk, but also that of other customers, by potentially opening the door to hackers
Potential cybersecurity threats can come from agents using social media to communicate with customers. weak passwords. allowing employees to take office laptop computers home. infrequent updating of antivirus software. I and II I and III II, III and IV I, II, III, and IV
D. I, II, III, and IV Cybersecurity threats can come from almost anywhere that digital media is used.
According to the Uniform Securities Act, an investment adviser may have custody of a customer's funds and securities if it has received the permission of the Administrator. it has received permission from the SEC. it does not share in the capital gains of the account. the Administrator has been informed of the custody.
D. the Administrator has been informed of the custody. As long as retaining custody of funds is not prohibited, an investment adviser may have custody of a customer's account after providing notice to the Administrator.
Under the NASAA Model Rule on Custody Requirements for Investment Advisers, if an investment adviser has custody of customer funds and securities, how often must the adviser send the customer a statement of account activity? Within three business days after any transaction Monthly Quarterly Annually
Quarterly An investment adviser in possession of customer assets must send a statement to the customer every three months (quarterly). The statement must list the customer's securities and all account transactions since the last statement date. At least once per calendar year, an independent CPA must verify by actual examination the customer assets held in custody
A customer of an investment adviser inadvertently mails some stock certificates to the firm's office. The firm does not maintain custody of customer assets. If the certificates were received on a Monday, NASAA rules would requires that the certificates be returned no later than Tuesday. returned no later than Thursday. returned the same day. forwarded to the broker-dealer promptly.
returned no later than Thursday. NASAA's custody rules require that an investment adviser who does not maintain custody must return certificates that are mistakenly sent within three business days. When it comes to checks, it depends on how the check is drawn. If made out to the investment adviser, it must be returned within three business days. If the check is made outto a third party (usually the executing broker- dealer), it must be forwarded to that third party. In all cases, the time limit is three business days after receipt.
An investment adviser registered in State A decides it wishes to maintain custody of customer assets. As long as the securities laws of State A do not prohibit custody, the investment adviser would have to promptly notify the Administrator by filing an amended Form ADV that it is going to maintain custody. the SEC on Form ADV that it is going to maintain custody. the Administrator in a letter that it is going to maintain custody. the Administrator electronically (email) that it is going to maintain custody.
the Administrator by filing an amended Form ADV that it is going to maintain custody. The notification to the Administrator (as a state-registered IA; the SEC has nothing to do with this) must be made promptly by amending the Form ADV
