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Item 9A determines whether the investment adviser or any related person has custody of client funds or securities under SEC definitions. Custody here means more than physical possession - it includes various forms of authority over client assets that create fiduciary responsibilities and compliance obligations.
Custody can arise through direct possession, authority to withdraw funds, legal ownership in a covered role, or other arrangements within the applicable definition. The procedures that apply depend on the arrangement and any applicable exception. A custody flag alone does not prove that a surprise examination or another specific procedure applies.
Item 9A(1)(a) asks about custody of cash or bank accounts, while 9A(1)(b) covers securities custody. The distinction matters because different custody situations carry different compliance requirements and client protection standards.
Items 9A(2)(a) and 9A(2)(b) quantify custody exposure through total dollar amounts and client counts, helping regulators and clients assess the scope and materiality of custody arrangements.
Additional Item 9 sections ask about reported procedures such as account statements, audits, surprise examinations, and qualified custodian status. The checkboxes do not establish the quality or effectiveness of those procedures.
Understanding Item 9A helps you assess how your assets would be held and protected, what custody-related costs might apply, and whether the adviser maintains appropriate safeguards for client funds and securities.
Find Item 9A within the Item 9 section on the firm's ADV form panel on Best Investors. Look for Yes answers that indicate custody arrangements requiring additional evaluation.
Review 9A(1)(a) - cash or bank accounts and 9A(1)(b) - securities custody to understand what types of assets the adviser has custody over. Yes answers do not necessarily indicate problems, but they require follow-up to understand custody arrangements and client protections.
If either custody box is Yes, examine the dollar amounts and client counts in 9A(2)(a) and 9A(2)(b) for the reported scale. These values do not establish compliance-system quality.
Continue through the rest of Item 9 on the same ADV panel to understand custody safeguards. Look for surprise examinations, qualified custodian relationships, and other client protection measures the adviser reports.
Ask advisers with custody arrangements to explain exactly what custody authority they have, who serves as qualified custodian for your assets, what account statements you will receive, and how your assets are protected from adviser bankruptcy or misconduct.
Cross-reference custody information with Item 5K separately managed accounts to understand custody arrangements in context with the adviser's business model and client asset management practices.
Consider custody arrangements in light of your preferences for asset protection and operational convenience. Some custody arrangements provide integrated service and efficiency. Others might create risks or complications that outweigh potential benefits.
Item 9A flags custody situations but does not specify the exact nature of custody authority or the quality of client protection procedures the adviser maintains. Custody through fee deduction authority creates different risks than custody through trustee relationships.
The section does not identify specific qualified custodians or evaluate their operational capabilities, financial strength, or client service quality. The choice of custodian significantly affects your account experience and asset protection.
Item 9A does not address custody costs, fee arrangements, or service levels associated with different custody structures. Some custody arrangements might be more expensive or provide fewer services than alternatives available to you directly.
The section also does not reveal how custody arrangements affect your access to assets, investment options, or account management flexibility. Some custody structures might limit your investment choices or create operational constraints.
Custody compliance quality and effectiveness remain unclear from Yes/No answers alone. Advisers with similar custody arrangements might maintain very different standards of client protection, oversight, and operational excellence.
Finally, Item 9A reflects custody arrangements at filing time but does not indicate planned changes, custodian transitions, or evolving custody practices that might affect your accounts after establishment.