Should [the Commission] revise the definition [of custody] in any way?
NASAA is generally pleased with the new definition, which follows in part the definition in the current Form ADV Part II. We particularly note that the proposed definition uses the term “the authority to obtain possession” rather than Form ADV’s “the ability to appropriate” client funds or securities. This is consistent with a model rule endorsed by NASAA in 1999. However, there is no discussion in the commentary accompanying the proposed rule as to why the change to “authority to obtain possession” was made. We recommend additional commentary clarifying that the remaining two parts of the definition address circumstances where an adviser misappropriates client resources without any express authority. From previous discussions with Commission staff concerning temporary custody, our understanding is that the Commission considers whether or not the sending of funds or securities to the adviser was based on prior discussions or arrangement. A prior arrangement would be categorized as “tra
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- Should [the Commission] revise the definition [of custody] in any way?
