Nebraska Administrative Code › Topic - BANKING AND FINANCE, DEPARTMENT OF › Title 48 - DEPARTMENT OF BANKING AND FINANCE › Chapter 7 - INVESTMENT ADVISERS › Section 48-7-012 - CUSTODY OF CLIENT FUNDS OR SECURITIES

Current through June 17, 2024
012.01 Safekeeping
				required. It is unlawful and deemed to be a fraudulent, deceptive, or
				manipulative act, practice, or course of business for an investment adviser,
				registered or required to be registered, to have custody of client funds or
				securities unless:
012.01A Notice to
				Director. The investment adviser notifies the Director promptly in writing that
				the investment adviser has or may have custody. Such notification is required
				to be given on Form ADV.
012.01B
				Qualified Custodian. A qualified custodian maintains those funds and
				securities:
012.01B1 In a separate account
				for each client under that client's name; or
012.01B2 In accounts that contain only the
				investment adviser's clients' funds and securities, under the investment
				adviser's name as agent or trustee for the clients, or, in the case of a pooled
				investment vehicle that the investment adviser manages, in the name of the
				pooled investment vehicle.
012.01C Notice to Clients. If an investment
				adviser opens an account with a qualified custodian on its client's behalf,
				under the client's name, under the name of the investment adviser as agent, or
				under the name of a pooled investment vehicle, the investment adviser must
				notify 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. If the
				investment adviser sends account statements to a client to which the investment
				adviser is required to provide this notice, the investment adviser must include
				in the notification provided to that client and in any subsequent account
				statement the investment adviser sends that client a statement urging the
				client to compare the account statements from the custodian with those from the
				investment adviser.
012.01D Account
				Statements. The investment adviser 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.
012.01E 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, managing
				member of a limited liability company, or holds a comparable position for
				another type of pooled investment vehicle, the account statements required
				under Section 012.01D, above, must be sent to each limited partner, member or
				other beneficial owner.
012.01F
				Independent Verification. The client funds and securities of which the
				investment adviser has custody are verified by actual examination at least once
				during each calendar year, by an independent certified public accountant,
				pursuant to a written agreement between the investment adviser and the
				independent certified public accountant, at a time that is chosen by the
				independent certified public accountant without prior notice or announcement to
				the investment adviser and that is irregular from year to year. The written
				agreement must provide for the first examination to occur within six months of
				becoming subject to this paragraph, except that, if the investment adviser
				maintains client funds or securities pursuant to this Rule as a qualified
				custodian, the agreement must provide for the first examination to occur no
				later than six months after obtaining the internal control report. The written
				agreement must require the independent certified public accountant to:
012.01F1 File a certificate on Form ADV-E
				with the Director within one hundred twenty days of the time chosen by the
				independent certified public accountant to verify client funds and securities,
				stating that it has examined the funds and securities and describing the nature
				and extent of the examination.
012.01F2 Notify the Director within one
				business day of the finding of any material discrepancies during the course of
				the examination, by means of a facsimile transmission or electronic mail,
				followed by first class mail or overnight delivery, directed to the attention
				of the Director; and
012.01F3 File
				within four business days of the resignation or dismissal from, or other
				termination of, the engagement, or removing itself or being removed from
				consideration for being reappointed, Form ADV-E accompanied by a statement that
				includes:
012.01F3a The date of such
				resignation, dismissal, removal, or other termination, and the name, address,
				and contact information of the independent certified public accountant;
				and
012.01F3b An explanation of any
				problems relating to examination scope or procedure that contributed to such
				resignation, dismissal, removal, or other termination.
012.01G Investment Advisers Acting
				as Qualified Custodians. If the investment adviser maintains, or if the
				investment adviser has custody because a related person maintains, client funds
				or securities pursuant to this Rule as a qualified custodian in connection with
				advisory services the investment adviser provides to clients:
012.01G1 The independent certified public
				accountant that the investment adviser retains to perform the independent
				verification required by Section
				012.01F, above,
				must be subject to regulation by the Public Company Accounting Oversight Board
				("PCAOB") or the Nebraska Board of Public Accountancy ("NBPA"), in accordance
				with applicable rules; and
012.01G2 The investment adviser must obtain,
				or receive from its related person, within six months of becoming subject to
				this paragraph and thereafter no less frequently than once each calendar year,
				a written internal control report prepared by an independent certified public
				accountant.
012.01G2a The internal control
				report must include an opinion of an independent certified public accountant as
				to whether controls have been placed in operation as of a specific date, and
				are suitably designed and are operating effectively to meet control objectives
				relating to custodial services, including the safeguarding of funds and
				securities held by either the investment adviser or a related person on behalf
				of the investment adviser's clients, during the year;
012.01G2b The independent certified public
				accountant must verify that the funds and securities are reconciled to a
				custodian other than the investment adviser or the investment adviser's related
				person; and
012.01G2c The
				independent certified public accountant must be subject to regulation by PCAOB
				or NBPA in accordance with applicable rules.
012.01H Independent Representatives. A client
				may designate an independent representative to receive, on his or her behalf,
				notices and account statements as required under Sections
				012.01C and
				012.01D,
				above.