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Can someone please explain the custody rule

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Jan 25, 2020 4:46 am

I’m just about done setting up my RIA and i’m stressing out if I should be saying I will have custody of client assets or not. I will only be offering non-discretionary accounts to clients with no ability to deposit or withdraw from their brokerage accounts. Furthermore, I will require clients of the firm to be solely responsible to meet fee obligations or their custodian. So essentially i’m saying I can’t touch their money and I can’t make any trades until after I made a recommendation and got their approval or denial.

According to what i’ve seen though the mere fact that I have the ability to access client’s accounts it would be considered as having custody. Even though in my client agreement forms it clearly states the firm has no ability to withdraw funds from the client’s account and all trading is done in a non-discretionary basis.

So with all that said, do I technically have custody or not? I’m hoping I don’t because I don’t want to shell out $15,000 every year for a “Surprise Examnation” The SEC’s weird way of saying audited.