Indiana Administrative Code › Title 710 - SECURITIES DIVISION › Article 4 - UNIFORM SECURITIES › Rule 9 - Investment Advisers › Section 9-13 - Custody and possession of client funds or securities

Current through July 10, 2024
Authority: IC 23-19-6-5
Affected: IC 23-19-4-12
Sec. 13.
(a) It shall
				constitute a dishonest practice within the meaning of IC 23-19-4-12(d)(13) for
				any investment adviser or investment adviser representative who has custody or
				possession of any funds or securities in which a client has a beneficial
				interest to do any act or take any action, directly or indirectly, with respect
				to the funds or securities unless the following occur:
(1) The investment adviser notifies the
				commissioner in writing, through Form ADV or otherwise, that the investment
				adviser has or may have custody.
(2) The securities of each client are
				segregated, marked to identify the particular client who has the beneficial
				interest therein, and held in safekeeping in some place reasonably free from
				risk of destruction or other loss.
(3) All funds of the clients are deposited in
				one (1) or more bank accounts that contain only clients' funds, and the
				following occur:
(A) The accounts are
				maintained in the name of the investment adviser as agent or trustee for the
				clients.
(B) The investment adviser
				maintains a separate record for each account that shows the following:
(i) The name and address of the bank where
				the account is maintained.
(ii) The
				dates and amounts of deposits in and withdrawals from the account.
(iii) The exact amount of each client's
				beneficial interest in the account.
(4) Immediately after accepting custody or
				possession of funds or securities from any client, the investment adviser
				notifies the client in writing of the following:
(A) The place and manner in which the funds
				and securities will be maintained.
(B) Any change in the place or manner in
				which the funds are being maintained.
(5) The investment adviser sends each of
				these clients an itemized statement showing the current funds and securities in
				the investment adviser's custody or possession at least once every three (3)
				months. The statement shall include all:
(A)
				debits;
(B) credits; and
(C) transactions;
occurring in the client's account during that period.
(6) At least once every
				calendar year, an independent certified public accountant or an independent
				public accountant verifies all client funds and securities of clients by actual
				examination at a time chosen by the accountant without prior notice to the
				investment adviser. A report of the accountant, stating that he or she has made
				an examination, shall be filed with the commissioner promptly after each
				examination. The accountant's report should comply with the usual technical
				requirements as to dating, salutation, and signature and should include in
				general terms an appropriate description of the scope of the physical
				examination of the securities and examination of the related books and records.
				In addition, the accountant's report will set forth the following:
(A) The date of the physical count and
				confirmation of balances of the client's accounts.
(B) A clear designation of the place and
				manner in which funds and securities are maintained.
(C) Whether the examination was made with
				prior notice to the investment adviser.
(D) The results of the examination, including
				the following:
(i) An expression of opinion as
				to whether the investment adviser was in compliance with this section as of the
				examination date.
(ii) An
				expression of opinion as to whether the investment adviser had been complying
				with this section during the period since the prior examination date. If the
				accountant believes that the investment adviser has not complied with this
				section, the accountant must state the reasons for his or her belief.
(iii) An identification of any material
				inadequacies found to exist in the books, records, and safekeeping facilities
				referred to in this section.
(iv)
				Any corrective action taken to remedy a material inadequacy.
(v) Corrective action that should be taken to
				remedy a material inadequacy.