Mont. Admin. R. 6.10.508 - CUSTODY OF CLIENT FUNDS OR SECURITIES BY INVESTMENT ADVISERS
(1) It shall be
unlawful for any investment adviser to take, or have custody of, any securities
or funds of any client unless:
(a) the
investment adviser notifies the commissioner in writing that the investment
adviser has, or may have, custody. Such notification may be given on Form
ADV;
(b) the securities of each
client are segregated, marked to identify the particular client having the
beneficial interest therein, and held in safekeeping in some place reasonably
free from risk of destruction or other loss:
(i) all client funds are deposited in one or
more bank accounts containing only clients' funds;
(ii) such account or accounts are maintained
in the name of the investment adviser as agent or trustee for such clients;
and
(iii) the investment adviser
maintains a separate record for each such account showing the name and address
of the bank where the account is maintained, the dates and amounts of deposits
in and withdrawals from the account, and the exact amount of each client's
beneficial interest in the account;
(c) immediately after accepting custody or
possession of funds or securities from any client, the investment adviser
notifies the client in writing of the place where, and the manner in which, the
funds and securities will be maintained and subsequently, if and when there is
a change in the place where, or the manner in which, the funds or securities
are maintained, the investment adviser gives written notice thereof to the
client;
(d) at least once every
three months, the investment adviser sends each client an itemized statement
showing the funds and securities in the investment adviser's custody at the end
of such period, and all debits, credits, and transactions in the client's
account during such period; and
(e)
at least once every calendar year, an independent certified public accountant
or public accountant verifies all client funds and securities by actual
examination at a time chosen by the accountant without prior notice to the
investment adviser. A report stating that such accountant has made an
examination of such funds and securities, and describing the nature and extent
of the examination, shall be filed with the commissioner promptly after each
such examination;
(f) for purposes
of this rule, a person will be deemed to have custody if said person directly,
or indirectly, holds client funds or securities, has any authority to obtain
possession of them, or has the ability to appropriate them.
(2) This rule shall not apply to
an investment adviser also registered as a broker-dealer under section 15 of
the Securities Exchange Act of 1934 if the broker-dealer is:
(a) subject to and in compliance with SEC
rule 15c3-1 (Net Capital Requirements for Brokers or Dealers), 17 CFR 240.15c3
- 1 under the Securities Exchange Act of 1934; or
(b) a member of an exchange whose members are
exempt from SEC Rule 15c3-1, 17 CFR 240.15c3 - 1 under the provisions of
paragraph (2)(b), and the broker-dealer is in compliance with all rules and
settled practices of the exchange imposing requirements with respect to
financial responsibility and the segregation of funds or securities carried for
the account of customers.
Notes
30-10-107, MCA; IMP, 30-10-107, 30-10-201, MCA;
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