WAC 460-24A-005   Definitions.  For purposes of this chapter:

     (1) "Custody" means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them or the ability to appropriate them.

     (a) "Custody" includes:

     (i) Possession of client funds or securities unless received inadvertently and returned to the sender promptly, but in any case within three business days of receiving them;

     (ii) Any arrangement (including a general power of attorney) under which an investment adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian upon an investment adviser's instruction to the custodian; and

     (iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives an investment adviser or its supervised person legal ownership of or access to client funds or securities.

     (b) Receipt of checks drawn by clients and made payable to unrelated third parties will not meet the definition of custody if forwarded to the third party within twenty-four hours of receipt and the adviser maintains a ledger or other listing of all securities or funds held or obtained inadvertently, including the following information:

     (i) Issuer;

     (ii) Type of security and series;

     (iii) Date of issue;

     (iv) For debt instruments, the denomination, interest rate, and maturity date;

     (v) Certificate number, including alphabetical prefix or suffix;

     (vi) Name in which registered;

     (vii) Date given to the adviser;

     (viii) Date sent to client or sender;

     (ix) Form of delivery to client or sender, or copy of the form of delivery to client or sender; and

     (x) Mail confirmation number, if applicable, or confirmation by client or sender of the fund's or security's return.

     (2) "Independent party" means a person who:

     (a) Is engaged by an investment adviser to act as a gatekeeper for the payment of fees, expenses, and capital withdrawals from a pooled investment;

     (b) Does not control and is not controlled by and is not under common control with the investment adviser; and

     (c) Does not have, and has not had within the past two years, a material business relationship with the investment adviser.

     (3) "Independent representative" means a person who:

     (a) Acts as an agent for an advisory client, including in the case of a pooled investment vehicle, for limited partners of a limited partnership, members of a limited liability company, or other beneficial owners of another type of pooled investment vehicle and by law or contract is obliged to act in the best interest of the advisory client or the limited partners or members, or other beneficial owners;

     (b) Does not control, is not controlled by, and is not under common control with the investment adviser;

     (c) Does not have, and has not had within the past two years, a material business relationship with the investment adviser.

     (4) "Qualified custodian" means the following independent institutions or entities:

     (a) A bank as defined in section 202 (a)(2) of the Advisers Act, 15 U.S.C. 80b-2 (a)(2), or a savings association as defined in section 3 (b)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813 (b)(1), that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act, 12 U.S.C. 1811;

     (b) A broker-dealer registered under section 15 (b)(1) of the Securities Exchange Act of 1934, 15 U.S.C. 78o (b)(1), holding the client assets in customer accounts;

     (c) A futures commission merchant registered under section 4f(a) of the Commodity Exchange Act, 7 U.S.C. 6f(a), holding the client assets in customer accounts, but only with respect to clients' funds and security futures, or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery and options thereon;

     (d) A foreign financial institution that customarily holds financial assets for its customers, provided that the foreign financial institution keeps the advisory clients' assets in customer accounts segregated from its proprietary assets; and

     (e) The transfer agent for an open-end company as defined in section 5 (a)(1) of the Investment Company Act of 1940, 15 U.S.C. 80a-5 (a)(1), only with respect to shares of the open-end company.



[Statutory Authority: RCW 21.20.450, 21.20.900, 21.20.100, 21.20.050 - [21.20].060. 08-18-033, § 460-24A-005, filed 8/27/08, effective 9/27/08.]