Series 63 practice questionmediumbalance sheet delivery
Under the NASAA custody rule, which client-reporting safeguard generally applies when a state-registered investment adviser has custody of client funds or securities?
- AThe qualified custodian sends account statements to clients at least quarterly✓ Correct answer
- BThe adviser sends every client a prospectus annually
- CThe adviser guarantees each client's principal balance
- DNo reporting safeguard applies unless the adviser also prepays its own fees
Explanation
Why A — The qualified custodian sends account statements to clients at least quarterly
When an investment adviser has custody, client funds and securities generally must be maintained with a qualified custodian, and the qualified custodian must send account statements directly to clients at least quarterly. Custody and prepaid-fee financial requirements should not be conflated.
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