Investment Adviser Compliance Exam Materials

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Compliance Exam Materials
I. Books & Records
II. Written Supervisory Procedures
III. Code of Ethics
IV. Custody
V. IA Contract Review List
VI. IA Exam Document Checklist

A. An adviser has custody when it has possession of client funds or securities, even briefly.

  1. Excluded is an inadvertent receipt by the adviser of client funds or securities, so long as the adviser returns them to the sender within three business days of receiving them.
  2. The rule does not permit advisers to forward clients’ funds and securities without having “custody,” although advisers may assist clients in such masters.
  3. An adviser’s possession of a check drawn by the client and made payable to a third party is not possession of client funds for purposes of the custody definition.

B. An adviser has custody if it has the authority to withdraw funds or securities from a client’s account.

  1. An adviser with power of attorney to sign checks on a client’s behalf, to withdraw funds or securities from a client’s account, or to dispose of client funds or securities for any purpose other than authorized trading has access to the client’s assets.
  2. An adviser authorized to deduct advisory fess or other expenses directly from a client’s account has access to, and therefore has custody of, the client funds and securities in that account. (In reliance on no-action letters issued by the SEC, advisers that have custody only because they deduct fees should answer “no” to Item 9 of Part 1A of Form ADV.)

C. An adviser has custody if it acts in any capacity that gives the adviser legal ownership of, or access to, the client funds or securities.

D. Advisers with custody of client funds and securities are required to maintain the funds and securities with qualified custodians including, but, limited to:

  1. banks and savings associations,
  2. registered broker-dealers,
  3. registered futures commission merchants,
  4. affiliates that are qualified custodians.

The preceding information has been prepared for your convenience to provide assistance in meeting the requirements for investment advisers under the Oklahoma Uniform Securities Act of 2004 (Act) and the Rules of the Oklahoma Securities Commission and the Administrator of the Department of Securities (Rules). Please note, however, that all provisions of the Act and Rules are applicable and control over this information if there is any variance therein.

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