Custody Requirements for Investment Advisers

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NO.:RULE TITLE:

69W-600.0132Custody Requirements for Investment Advisers

NOTICE OF CHANGE

Notice is hereby given that the following changes have been made to the proposed rule in accordance with subparagraph 120.54(3)(d)1., F.S., published in Vol. 41 No. 19, January 29, 2015 issue of the Florida Administrative Register.

Following comment by the Joint Administrative Procedures Committee, the following amendments are made.

 

Paragraphs (2)(d) and (2)(e):

 

(d) Account Statements. The investment adviser must have an agreement with the qualified custodian for the qualified custodian to send has a reasonable basis, after due inquiry, for believing that the qualified custodian sends an account statement, at least quarterly, to each client for which it maintains funds or securities, identifying the amount of funds and of each security in the account at the end of the period and setting forth all transactions in the account during that period.

(e) Special rule for limited partnerships and limited liability companies. If the investment adviser or a related person is a general partner of a limited partnership (or managing member of a limited liability company, or holds a comparable position for another type of pooled investment vehicle), the investment adviser must direct the qualified custodian to send the account statements required under paragraph subsection (2)(d) of this rule must be sent to each limited partner (or member or other beneficial owner).

 

Subparagraph (2)(f)1.:

 

1. File a certificate on Form ADV-E electronically through the Investment Adviser Registration Depository (IARD) of the Financial Industry Regulatory Authority (FINRA) with the Office within 120 days of the time chosen by the independent certified public accountant in subsection (2)(f) of this rule, stating that it has examined the funds and securities and describing the nature and extent of the examination.  Form ADV-E (01-13) is hereby incorporated by reference and a sample form is accessible at http://www.flrules.org____ or http://www.flofr.com/______.

 

Paragraph (3)(e):

 

(e) Investment Adviser as Trustee. When a trust retains an investment adviser, investment adviser representative or employee, director or owner of an investment adviser as trustee and the investment adviser acts as the investment adviser to that trust, an investment adviser is not required to obtain an independent verification of client funds and securities maintained by a qualified custodian under paragraph subsection (2)(f) of this rule, if all of the following conditions in subparagraphs 1. through 3. are met: The the investment adviser instructs will instruct the qualified custodian of the trust as follows in subparagraphs 1. through 3.:

 

Subparagraph (3)(e)2.:

 

2. Distribution of Assets. Except as otherwise set forth in sub-subparagraph a. below, the qualified custodian may transfer funds or securities, or both, of the trust only upon the direction of the trustee (who may be the investment adviser, investment adviser representative or employee, director or owner of the investment adviser), who the investment adviser has duly accepted as an authorized signatory. The grantor of the trust or attorneys for the trust, if it is a testamentary trust, the co-trustee (other than the investment adviser, investment adviser representative or employee, director or owner of the investment adviser), or a defined beneficiary of the trust, must designate the authorized signatory for management of the trust. The direction to transfer funds or securities, or both, can only be made to the following:

 

Paragraph (3)(e)2.d.:

 

d. To third persons independent of the investment adviser for any other purpose legitimately associated with the management of the trust; or