Nevada Administrative Code › Chapter 90 - Securities › Section 90.Sec. 7 - NEW

Current through June 11, 2024
1.
		  Except as otherwise provided in this section, it is unlawful and deemed to be a
		  fraudulent, deceptive and manipulative act, practice and course of business for
		  an investment adviser, whether licensed or required to be licensed, to have
		  custody of client funds or securities.
2. An investment adviser, whether licensed or
		  required to be licensed, may have custody of client funds and securities if:
(a) The investment adviser promptly notifies
		  the Administrator on a Uniform Application for Investment Adviser Registration
		  (Form ADV) that the investment adviser has or may have custody of the client
		  funds and securities;
(b) Except as
		  otherwise provided in subsection 9, a qualified custodian maintains the client
		  funds and securities:
(1) In a separate
		  account for each client, the account of which must be designated by the name of
		  the client; or
(2) In an account
		  that contains only the client funds and securities and which is:
(I) In the name of the investment adviser, as
		  agent or trustee for the client; or
(II) In the case of a pooled investment
		  vehicle managed by the investment adviser, in the name of the pooled investment
		  vehicle;
(c)
		  Except as otherwise provided in subsection 10, the investment adviser notifies
		  each client whose funds or securities are maintained in an account described in
		  paragraph (b), the notification of which must:
(1) Be sent to the client:
(I) Upon the opening of the account;
		  and
(II) At any time there is a
		  change to the information described in subparagraph (2); and
(2) Include, without limitation:
(I) The name and address of the qualified
		  custodian;
(II) The manner in which
		  the client funds and securities are maintained; and
(III) If the investment adviser sends an
		  account statement to the client, a statement directing the client to compare
		  the account statement of the investment adviser with the account statement of
		  the qualified custodian;
(d) Except as otherwise provided in
		  subsection 10, the investment adviser has a reasonable basis, after due
		  inquiry, for believing that the qualified custodian described in paragraph (b)
		  sends, at least quarterly, to each client for which the qualified custodian
		  maintains funds and securities and to each person described in subparagraph (1)
		  of paragraph (e), if applicable, an account statement which includes, without
		  limitation:
(1) The amount of funds and type
		  of securities in the account at the end of the statement period; and
(2) Each transaction during the statement
		  period;
(e) The
		  investment adviser is a general partner of a limited partnership or managing
		  member of a limited-liability company, or the investment adviser otherwise
		  holds a comparable position for another type of pooled investment vehicle and
		  the investment adviser:
(1) Enters into a
		  written agreement with an independent party who is obliged to act in the best
		  interest of the limited partners, members or other beneficial owners to review
		  all fees, expenses and capital withdrawals from the accounts described in
		  paragraph (b); and
(2) Sends all
		  invoices and receipts to the independent party described in subparagraph (1).
		  The invoices and receipts must include, without limitation, the amount of the
		  fee, expenses or capital withdrawal and the method of calculation, such that
		  the independent party may:
(I) Determine that
		  the payment is in accordance with the standards of the pooled investment
		  vehicle, including, without limitation, any standard generally established in
		  the partnership agreement or membership agreement, as applicable; and
(II) Forward to the qualified custodian
		  approval for payment of the invoice with a copy to the investment
		  adviser;
(f)
		  Except as otherwise provided in subsections 10 and 11, the client funds and
		  securities 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; and
(g) The
		  investment adviser maintains, or the investment adviser has custody because a
		  related person maintains, the client funds or securities as a qualified
		  custodian in connection with any advisory services the investment adviser
		  provides to clients and if:
(1) The
		  independent certified public accountant the investment adviser retains to
		  perform the independent verification required by paragraph (f) is registered
		  with and subject to regular inspection by, as of the commencement of the
		  professional engagement period and as of each calendar year-end, the Public
		  Company Accounting Oversight Board in accordance with its rules; and
(2) The investment adviser obtains, or
		  receives from its related person, within 6 months of becoming subject to this
		  paragraph and thereafter not less frequently than once each calendar year, a
		  written internal control report.