New Mexico Administrative Code
Title 12 - TRADE, COMMERCE AND BANKING
Chapter 11 - SECURITIES
Part 5 - INVESTMENT ADVISERS, INVESTMENT ADVISER REPRESENTATIVES AND FEDERAL COVERED ADVISERS
Section 12.11.5.7 - DEFINITIONS
Universal Citation: 12 NM Admin Code 12.11.5.7
Current through Register Vol. 35, No. 18, September 24, 2024
The following definitions apply throughout this part.
A. "Custody" means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them or having the ability to appropriate them.
(1) Custody includes:
(a) 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;
(b) any arrangement (including a general
power of attorney) under which the investment adviser is authorized or
permitted to withdraw client funds or securities maintained with a custodian
upon the adviser's instruction to the custodian; and
(c) any capacity (such as a 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 the investment adviser, an owner of the investment
adviser, or a supervised person of the investment adviser legal ownership of or
access to client funds or securities.
(2) 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 24 hours of receipt and the adviser
maintains the records required.
B. For purposes of 12.11.5 NMAC, an investment adviser shall not be deemed to be exercising "discretion" or "discretionary authority" when it places trade orders with a broker-dealer pursuant to a third party trading agreement if:
(1) the investment adviser has executed a
separate investment adviser contract exclusively with its client which
acknowledges that a third party trading agreement will be executed to allow the
investment adviser to effect securities transactions for the client in the
client's broker-dealer account;
(2)
the investment adviser contract specifically states that the client does not
grant discretionary authority to the investment adviser and the investment
adviser in fact does not exercise discretion with respect to the account;
and
(3) a third party trading
agreement is executed between the client and a broker-dealer which specifically
limits the investment adviser's authority in the client's broker-dealer account
to the placement of trade orders and deduction of investment adviser
fees.
Disclaimer: These regulations may not be the most recent version. New Mexico may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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