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460-24A-107  <<  460-24A-108 >>   460-24A-109

WAC 460-24A-108

Agency filings affecting this section

Custody requirements for an investment adviser that acts as trustee and investment adviser to a trust.

If you are an investment adviser registered or required to be registered under RCW 21.20.040 that acts as an investment adviser to a trust and the trust has retained you or one of your representatives, employees, directors, or owners as trustee, you must comply with the following requirements:
(1) You must send invoices to the qualified custodian and a person connected to the trust at the same time. You must send to the grantor of the trust, the attorney for the trust if it is a testamentary trust, the co-trustee (other than you or one of your representatives, employees, directors, or owners); or a defined beneficiary of the trust, at the same time that you send any invoice to the qualified custodian, an invoice showing the amount of the trustees' fee or investment management or advisory fee, the value of the assets on which the fees were based, and the specific manner in which the fees were calculated.
(2) You must have an agreement with a qualified custodian that contains certain terms. You must enter into a written agreement with a qualified custodian that complies with the following requirements:
(a) The agreement must restrict payments to you or persons related to you. The agreement must specify that the qualified custodian will neither deliver trust securities nor transmit any funds to you or one of your representatives, employees, directors, or owners, except that the qualified custodian may pay trustees' fees to the trustee and investment management or advisory fees to you, provided that:
(i) The grantor of the trust or attorneys for the trust, if it is a testamentary trust, the co-trustee (other than you or one of your representatives, employees, directors, or owners), or a defined beneficiary of the trust has authorized the qualified custodian in writing to pay those fees;
(ii) The statements for those fees show the amount of the fees for the trustee and, in the case of statements for investment management or advisory fees, show the value of the trust assets on which the fee is based and the manner in which the fee was calculated; and
(iii) The qualified custodian agrees to send to the grantor of the trust, the attorneys for a testamentary trust, the co-trustee (other than you or one of your representatives, employees, directors, or owners); or a defined beneficiary of the trust, at least quarterly, a statement of all disbursements from the account of the trust, including the amount of investment management fees paid to you and the amount of trustees' fees paid to the trustee.
(b) The agreement must restrict the transfer of funds or securities. Except as otherwise set forth in subsection (1)(b)(i) of this section, the agreement must specify that the qualified custodian may transfer funds or securities, or both, of the trust only upon the direction of the trustee (who may be you or one of your representatives, employees, directors, or owners), who you have duly accepted as an authorized signatory. The grantor of the trust or attorneys for the trust, if it is a testamentary trust, the co-trustee (other than you or one of your representatives, employees, directors, or owners), or a defined beneficiary of the trust, must designate the authorized signatory for management of the trust. The agreement must further specify that the direction to transfer funds or securities, or both, can only be made to the following:
(i) To a trust company, bank trust department or brokerage firm independent from you for the account of the trust to which the assets relate;
(ii) To the named grantors or to the named beneficiaries of the trust;
(iii) To a third person independent from you in payment of the fees or charges of the third person including, but not limited to:
(A) Attorney's, accountant's, or qualified custodian's fees for the trust; and
(B) Taxes, interest, maintenance, or other expenses, if there is property other than securities or cash owned by the trust;
(iv) To third persons independent from you for any other purpose legitimately associated with the management of the trust; or
(v) To a broker-dealer in the normal course of portfolio purchases and sales, provided that the transfer is made on payment against delivery basis or payment against trust receipt.
(3) You must notify the director that you will comply with these safekeeping requirements. You must notify the director on Form ADV that you will comply with the safekeeping requirements set forth in this section.
(4) You are not required to comply with the net worth and bonding requirements if you comply with these safekeeping requirements. If you have custody solely as defined in WAC 460-24A-005 (1)(a)(iii) because you are the trustee of a trust and you comply with the safekeeping requirements in WAC 460-24A-105 and 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.
[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-108, filed 8/27/08, effective 9/27/08.]