Arizona Administrative Code › Title 14 - PUBLIC SERVICE CORPORATIONS; CORPORATIONS AND ASSOCIATIONS; SECURITIES REGULATION › Chapter 6 - Corporation Commission - Investment Management › Article 2 - DUTIES OF INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES › Section R14-6-206 - Custody of Client Funds or Securities by Investment Advisers

Current through Register Vol. 30, No. 28, July 12, 2024
A. Except as
				otherwise provided in subsection (B), it shall constitute a fraudulent practice
				within the meaning of A.R.S. §
									44-3241(A)(4)
				 for any investment adviser to take or have
				custody of any securities or funds of any client unless:
1. The investment adviser notifies the
				Commission in writing that the investment adviser has or may have custody of
				client funds or securities. Such notification may be given on Form
				ADV.
2. A qualified custodian
				maintains those funds and securities:
a. In a
				separate account for each client under that client's name; or
b. In accounts containing only clients' funds
				and securities, maintained in the name of the investment adviser as agent or
				trustee for such clients.
3. If opening an account with a qualified
				custodian, either under the client's name or under the investment adviser's
				name as agent, the investment adviser notifies the client in writing of the
				qualified custodian's name, address, and the manner in which the funds or
				securities are maintained, promptly when the account is opened and following
				any changes to this information.
4.
				Account statements are sent to clients at least quarterly, either:
a. By a qualified custodian, if the
				investment adviser has a reasonable basis for believing that the qualified
				custodian sends the requisite account statement 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; or
b. By the investment adviser, to each client
				for whom it has custody of funds or securities, identifying the amount of funds
				and of each security of which it has custody at the end of the period and
				setting forth all transactions in the account during that period if:
i. An independent certified public accountant
				verifies all of those client funds and securities by actual examination at
				least once during each calendar year, at a time chosen by the accountant,
				without prior notice or announcement to the investment adviser, that is
				irregular from year to year; and
ii. The independent certified public
				accountant files a copy of the auditor's report and financial statements with
				the Commission within 30 calendar days after the completion of the examination,
				along with a letter stating that it has examined the funds and securities,
				describing the nature and extent of the examination; and
iii. Upon finding any material discrepancies
				during the course of the examination, the independent certified public
				accountant notifies the Commission within one business day of the finding, by
				means of a fax transmission or electronic mail, followed by first-class
				mail.