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WAC 460-24A-107

Agency filings affecting this section

Custody requirements for an investment adviser that manages a pooled investment vehicle or trust.

(1) If you are an investment adviser registered or required to be registered under RCW 21.20.040 that has custody as defined in WAC 460-24A-005 (1)(a)(iii), you must either:
(a) Comply with additional safekeeping requirements. In addition to the safekeeping requirements set forth in WAC 460-24A-105, you must comply with the following safekeeping requirements:
(i) You must engage an independent party to authorize withdrawals from the pooled account. You must hire an independent party to review all fees, expenses, and capital withdrawals from the pooled account;
(ii) You must send detailed invoices or receipts to the independent party. You must send all invoices or receipts to the independent party, detailing the amount of the fee, expenses, or capital withdrawal and the method of calculation such that the independent party can:
(A) Determine that the payment is in accordance with the pooled investment vehicle standards (generally the partnership agreement or membership agreement); and
(B) Forward, to the qualified custodian, approval for payment of the invoice with a copy to the investment adviser; and
(iii) You must notify the director that you will comply with these additional safekeeping requirements. You must notify the director on Form ADV that you will comply with the safekeeping requirements in (a) of this subsection; or
(b) You must provide audited financial statements of the pooled investment vehicle to all limited partners or members. If you do not comply with the safekeeping requirements set forth in WAC 460-24A-105 and (a) of this subsection, you must comply with the following alternative safekeeping requirements:
(i) The pooled investment vehicle must be subject to annual audits. You must cause the financial statements of the limited partnership (or limited liability company, or another type of pooled investment vehicle) for which you are a general partner (or managing member or other comparable position) to be subject to audit, at least annually, by an independent certified public accountant to be conducted in accordance with generally accepted auditing standards;
(ii) You must distribute audited financial statements for the pooled investment vehicle to all beneficial owners. You must distribute audited financial statements prepared in accordance with generally accepted accounting principles for the limited partnership (or limited liability company, or another type of pooled investment vehicle) for which you are a general partner (or managing member or other comparable position) to all limited partners (or members or other beneficial owners) within one hundred twenty days of the end of its fiscal year; and
(iii) You must notify the director that you will distribute audited financial statements of the pooled investment vehicle to all beneficial owners. You must notify the director on Form ADV that you will comply with the safekeeping requirements in (b)(i) and (ii) of this subsection.
(2) If you comply with the additional safekeeping requirements, you are not required to comply with the net worth and bonding requirements. If you have custody solely as defined in WAC 460-24A-105 (1)(a)(iii) and you comply with the safekeeping requirements in WAC 460-24A-105 and subsection (1)(a) of this section, you are not required to comply with the net worth and bonding requirements for an investment adviser that has custody set forth in WAC 460-24A-170.
(3) If you distribute audited financial statements of the pooled investment vehicle to all beneficial owners, you are not required to comply with the surprise examination requirements. You are not required to comply with WAC 460-24A-105 (4)(b)(ii) and (iii) with respect to the account of a limited partnership (or limited liability company, or another type of pooled investment vehicle) that is subject to audit if you comply with subsection (1)(b) of this section.
[Statutory Authority: RCW 21.20.450, 21.20.900, 21.20.100, 21.20.050 - [21.20].060. WSR 08-18-033, ยง 460-24A-107, filed 8/27/08, effective 9/27/08.]