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(a) A state investment adviser may not take custody of client funds or securities unless
(1) the state investment adviser notifies the administrator in writing that the state investment adviser has or may have custody; notification may be given on SEC Form ADV;
(2) the securities of each client are segregated, marked to identify the particular client having the beneficial interest in the security, and held in safekeeping in a place reasonably free from risk of destruction or other loss;
(3) all client funds are deposited in one or more bank accounts that contain only client funds, and
(A) each account is maintained in the name of the state investment adviser as agent or trustee for the clients; and
(B) the state investment adviser maintains a separate record for each account that shows the name and address of the bank where the account is maintained, the dates and amounts of deposits to and withdrawals from the account, and the exact amount of each client's beneficial interest in the account;
(4) the state investment adviser, immediately after accepting custody of funds or securities from a client, notifies the client in writing of the place and the manner in which the funds and securities will be maintained, and thereafter immediately notifies the client in writing of any changes in the place or the manner in which the funds or securities are maintained;
(5) the state investment adviser, at the end of every three months, sends each client an itemized statement showing the funds and securities in the state investment adviser's custody and each debit, credit, and transaction in the client's account during the period; and
(6) at least once every calendar year,
(A) an independent certified public accountant or public accountant
(i) verifies all client funds and securities by actual examination at a time chosen by the accountant without prior notice to the state investment adviser; and
(ii) issues a report stating that the accountant has made an examination of all client funds and securities and describing the nature and extent of the examination; and
(B) the report prepared under (A)(ii) of this paragraph is filed with the administrator promptly after each examination.
(b) This section does not apply to a state investment adviser also registered as a broker-dealer under 15 U.S.C. 78o (sec. 15 of the Securities Exchange Act of 1934) if the broker-dealer is
(1) subject to and in compliance with 17 C.F.R. 240.15c3-1 (Net Capital Requirements for Brokers or Dealers); or
(2) a member of an exchange whose members are exempt from 17 C.F.R. 240.15c3-1, as provided in 17 C.F.R. 240.15c3-1(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.
History: Eff. 3/24/76, Register 57; am 4/19/2000, Register 154
Authority: AS 45.55.020
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Last modified 7/05/2006