NASAA: Comment Request Regarding Proposed Changes To Model Custody and Recordkeeping Rules To Clarify Requirements Relating to Inadvertent Custody of Client Funds

NASAA has released for internal and public comment proposed changes to Model Rules 102(e)(1)-1 and 203(a)-2 under the Uniform Securities Act of 1956 and Model Rules USA 2002 411(c)-1 and USA 2002 411(f)-(1) under the Uniform Securities Act of 2002 to clarify requirements relating to inadvertent custody of client funds. The proposal is intended to harmonize recordkeeping requirements in the rules to provisions that establish when funds and securities that are inadvertently received are deemed to be in the possession of an adviser.Comments Due: February 12, 2013.

Lofchie Comment: This proposal would be applicable to state-registered investment advisers. We note that issue of "inadvertent custody" is also relevant to SEC-registered investment advisers, as discussed in the no-action letter linked here.

See: Model Custody and Recordkeeping Rules (links externally to NASAA website).