Q:
An advisor has all client advisory fees automatically deducted from their accounts by the custodian.  Under this circumstance, the advisor is not considered to have custody of client funds if which of the following conditions are met?
I. The advisor sends the client a copy of the bill within 10 days after deduction from their account
II. The custodian sends the client a statement at least quarterly
III. The client has provided written authorization for the fees to be deducted
IV. The advisor sends the client the value of the assets and how the fee was calculated
A) I and III only
B) I, II and III
C) II, III and IV
D) I, II, III and IV
A:

The correct answer is c)
An advisor is not deemed to have custody of client funds when debiting management fees from the client account directly if all of the following conditions are met:  the client must have provided written authorization to do so, the custodian agrees to send the client statements at least quarterly, and a copy of the bill and the manner in which the fee was calculated is provided to the client and custodian at the same time.


RELATED FAQS

  1. Which of the following signatures are required on a client’s new account form ... ...

    The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ...
  2. What fees do financial advisors charge?

    Learn how much financial advisors charge clients; discover the various payment plans available to customers seeking financial ...
  3. Under the Uniform Securities Act, registration with the Administrator as an investment ...

    The correct answer is c. I is incorrect, since broker-dealers or their agents who don’t receive a fee for making investment ...
  4. A margin account has a long market value of $12,000, a debit balance of -$6,000 ...

    The correct answer is a. I is correct since the stock's currently valued at $12,000 are increasing 20% or $2,400. II is incorrect ...
  5. Which of the following statements is (are) true with respect to the calculation ...

    The correct answer is: a) (I) is incorrect because results that cover a period of less than a year must "not" be annualized. ...
  6. Which of the following statements is (are) true with respect to setting the proper ...

    The correct answer is: d) Choice II is incorrect because the longer the investment horizon, the less emphasis must be placed ...
RELATED TERMS
  1. Advisor Account

    A type of investment account where an investment advisor works ...
  2. Fee-Based Investment

    An investment account in which the advisor's compensation is ...
  3. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  4. Investment Manager

    A person or organization that makes investments in portfolios ...
  5. Custodian

    A financial institution that holds customers' securities for ...
  6. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center